UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 20212022

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________

Commission File Number: 001-12421


 NU SKIN ENTERPRISES, INC. 
 (Exact name of registrant as specified in its charter) 

Delaware 87-0565309
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 
75 West Center Street
Provo, Utah 84601
 
 (Address of principal executive offices, including zip code) 

 (801) 345-1000 
 (Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, $.001 par value NUS New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☑   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☑
Accelerated filer   ☐
Non-accelerated filer   ☐
Smaller reporting company   ☐
 
Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No  ☑

As of August 1, 2021, 50,134,741July 31, 2022, 50,380,606 shares of the registrant’s Class A common stock, $.001 par value per share, were outstanding.




NU SKIN ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q – SECOND QUARTER 20212022

TABLE OF CONTENTS

 Page
Part I.Financial Information 
 Item 1.
Financial Statements (Unaudited):
 
  
Consolidated Balance Sheets
31
  
Consolidated Statements of Income
42
  
Consolidated Statements of Comprehensive Income
53
  
Consolidated Statements of Stockholders’ Equity
64
  
Consolidated Statements of Cash Flows
86
  
Notes to Consolidated Financial Statements
97
 Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2017
 Item 3.
Quantitative and Qualitative Disclosures about Market Risk
2825
 Item 4.
Controls and Procedures
2825
    
Part II.
Other Information
 
 Item 1.
Legal Proceedings
2926
 Item 1A.
Risk Factors
2926
 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3127
 Item 3.
Defaults Upon Senior Securities
3127
 Item 4.
Mine Safety Disclosures
3127
 Item 5.
Other Information
3127
 Item 6.
Exhibits
3228
    
 
Signature
3329

In this Quarterly Report on Form 10-Q, references to “dollars” and “$” are to United States (“U.S.”) dollars.

Nu Skin, Pharmanex, and ageLOC are our trademarks. The italicized product names used in this Quarterly Report on Form 10-Q are product names and also, in certain cases, our trademarks.


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PART I.  FINANCIAL INFORMATION

ITEM 1.
ITEM 1.
FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.
Consolidated Balance Sheets (Unaudited)
(U.S. dollars in thousands)

 
June 30,
2021
  
December 31,
2020
  
June 30,
2022
  
December 31,
2021
 
ASSETS            
Current assets:            
Cash and cash equivalents $354,759  $402,683  $363,923  $339,593 
Current investments  24,499   21,216   17,877   15,221 
Accounts receivable, net  64,701   63,370   43,694   41,299 
Inventories, net  390,977   314,366   354,211   399,931 
Prepaid expenses and other  126,586   101,563   103,188   76,906 
Total current assets  961,522   903,198   882,893   872,950 
                
Property and equipment, net  474,167   468,181   443,036   453,674 
Operating lease right-of-use assets  136,738   155,104   118,413   120,973 
Goodwill  215,582   202,979   206,432   206,432 
Other intangible assets, net  98,955   89,532   72,665   76,991 
Other assets  163,016   138,082   177,462   175,460 
Total assets $2,049,980  $1,957,076  $1,900,901  $1,906,480 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable $60,632  $66,174  $55,013  $49,993 
Accrued expenses  403,165   446,682   289,130   372,201 
Current portion of long-term debt  152,500   30,000   40,000   107,500 
Total current liabilities  616,297   542,856   384,143   529,694 
                
Operating lease liabilities  100,826   112,275   90,156   88,759 
Long-term debt  288,343   305,393   387,179   268,781 
Other liabilities  126,688   102,281   98,388   106,474 
Total liabilities  1,132,154   1,062,805   959,866   993,708 
                
Commitments and contingencies (Notes 5 and 11)  0   0   0   0 
                
Stockholders’ equity:                
Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued
  91   91   91   91 
Additional paid-in capital  586,976   579,801   606,349   601,703 
Treasury stock, at cost – 40.4 million and 39.7 million shares
  (1,509,867)  (1,461,593)
Treasury stock, at cost – 39.9 million and 40.7 million shares
  (1,520,769)  (1,526,860)
Accumulated other comprehensive loss  (68,553)  (64,768)  (90,638)  (73,896)
Retained earnings  1,909,179   1,840,740   1,946,002   1,911,734 
Total stockholders’ equity  917,826   894,271   941,035   912,772 
Total liabilities and stockholders’ equity
 $2,049,980  $1,957,076  $1,900,901  $1,906,480 

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
(U.S. dollars in thousands, except per share amounts)

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2021  2020  2021  2020  2022  2021  2022  2021 
Revenue $704,055  $612,366  $1,381,081  $1,130,394  $560,615  $704,055  $1,165,514  $1,381,081 
Cost of sales  171,975   154,110   342,541   279,903   148,100   171,975   309,599   342,541 
Gross profit  532,080   458,256   1,038,540   850,491   412,515   532,080   855,915   1,038,540 
                                
Operating expenses:                                
Selling expenses  277,893   248,628   551,639   454,670   219,426   280,589   462,125   556,554 
General and administrative expenses  168,811   151,554   338,612   301,182   141,562   166,115   290,118   333,697 
Total operating expenses  446,704   400,182   890,251   755,852   360,988   446,704   752,243   890,251 
                                
Operating income  85,376   58,074   148,289   94,639   51,527   85,376   103,672   148,289 
Other income (expense), net  (4,012)  1,581   (2,430)  (4,593)  (8,640)  (4,012)  (10,093)  (2,430)
                                
Income before provision for income taxes  81,364   59,655   145,859   90,046   42,887   81,364   93,579   145,859 
Provision for income taxes  22,026   17,804   39,091   28,465   8,650   22,026   20,626   39,091 
                                
Net income $59,338  $41,851  $106,768  $61,581  $34,237  $59,338  $72,953  $106,768 
                                
Net income per share (Note 6):                                
Basic $1.18  $0.81  $2.12  $1.15  $0.68  $1.18  $1.45  $2.12 
Diluted $1.15  $0.81  $2.06  $1.15  $0.67  $1.15  $1.43  $2.06 
                                
Weighted-average common shares outstanding (000s):                                
Basic  50,115   51,872   50,409   53,466   50,368   50,115   50,181   50,409 
Diluted  51,557   51,925   51,850   53,502   50,960   51,557   50,959   51,850 

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(U.S. dollars in thousands)

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
  2021  2020  2021  2020 
Net income $59,338  $41,851  $106,768  $61,581 
                 
Other comprehensive income (loss), net of tax:                
Foreign currency translation adjustment, net of taxes of $3 and $8 for the three months ended June 30, 2021 and 2020, respectively, and $1 and $6 for the six months ended June 30, 2021 and 2020, respectively
  3,653   6,848   (6,266)  (8,149)
Net unrealized gains/(losses) on cash flow hedges, net of tax benefit of $168 and 0 for the three months ended June 30, 2021 and 2020, respectively and $(671) and 0 for the six months ended June 30, 2021 and 2020, respectively
  (610)  0   2,430   0 
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $(8) and 0 for the three months ended June 30, 2021 and 2020, respectively and $(14) and 0 for the six months ended June 30, 2021 and 2020, respectively
  30   0   51   0 
   3,073   6,848   (3,785)  (8,149)
Comprehensive income $62,411  $48,699  $102,983  $53,432 
 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
  2022  2021  2022  2021 
Net income $34,237  $59,338  $72,953  $106,768 
                 
Other comprehensive (loss) income, net of tax:                
Foreign currency translation adjustment, net of taxes of $36 and $3 for the three months ended June 30, 2022 and 2021, respectively, and $29 and $1 for the six months ended June 30, 2022 and 2021, respectively
  (22,452)  3,653   (24,412)  (6,266)
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(436) and $168 for the three months ended June 30, 2022 and 2021, respectively and $(2,179) and $(671) for the six months ended June 30, 2022 and 2021, respectively.
  1,578   (610)  7,892   2,430 
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $65 and $(8) for the three months ended June 30, 2022 and 2021, respectively and $61 and $(14) for the six months ended June 30, 2022 and 2021, respectively
  (236)  30   (222)  51 
   (21,110)  3,073   (16,742)  (3,785)
Comprehensive income $13,127  $62,411  $56,211  $102,983 

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.
Consolidated Statements ofStockholders’ Equity (Unaudited)
(U.S. dollars in thousands)

 For the Three Months Ended June 30, 2021  For the Three Months Ended June 30, 2022 
 
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total  
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total 
Balance at April 1, 2021
 $91  $579,204  $(1,505,076) $(71,626) $1,868,881  $871,474 
Balance at April 1, 2022
 $91  $599,258  $(1,526,778) $(69,528) $1,931,157  $934,200 
                                   ��            
Net income  0   0   0   0   59,338   59,338   0   0   0   0   34,237   34,237 
Other comprehensive loss, net of tax  0   0   0   3,073   0   3,073   0   0   0   (21,110)  0   (21,110)
Repurchase of Class A common stock (Note 6)  0   0   (10,004)  0   0   (10,004)  0   0   (10,004)  0   0   (10,004)
Exercise of employee stock options (0.2 million shares)/vesting of stock awards
  0   1,192   5,213   0   0   6,405 
Exercise of employee stock options (0.7 million shares)/vesting of stock awards
  0   5,069   16,013   0   0   21,082 
Stock-based compensation  0   6,580   0   0   0   6,580   0   2,022   0   0   0   2,022 
Cash dividends  0   0   0   0   (19,040)  (19,040)  0   0   0   0   (19,392)  (19,392)
Balance at June 30, 2021
 $91  $586,976  $(1,509,867) $(68,553) $1,909,179  $917,826 
Balance at June 30, 2022
 $91  $606,349  $(1,520,769) $(90,638) $1,946,002  $941,035 

 For the Three Months Ended June 30, 2020  For the Three Months Ended June 30, 2021 
 
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total  
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total 
Balance at April 1, 2020
 $91  $557,916  $(1,384,036) $(100,289) $1,726,816  $800,498 
Balance at April 1, 2021
 $91  $579,204  $(1,505,076) $(71,626) $1,868,881  $871,474 
                                                
Net income  0   0   0   0   41,851   41,851   0   0   0   0   59,338   59,338 
Other comprehensive income, net of tax  0   0   0   6,848   0   6,848   0   0   0   3,073   0   3,073 
Repurchase of Class A common stock (Note 6)  0   0   (46,481)  0   0   (46,481)  0   0   (10,004)  0   0   (10,004)
Exercise of employee stock options (0.2 million shares)/vesting of stock awards
  0   330   3,453   0   0   3,783   0   1,192   5,213   0   0   6,405 
Stock-based compensation  0   4,869   0   0   0   4,869   0   6,580   0   0   0   6,580 
Cash dividends  0   0   0   0   (19,356)  (19,356)  0   0   0   0   (19,040)  (19,040)
Balance at June 30, 2020
 $91  $563,115  $(1,427,064) $(93,441) $1,749,311  $792,012 
Balance at June 30, 2021
 $91  $586,976  $(1,509,867) $(68,553) $1,909,179  $917,826 

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
(U.S. dollars in thousands)

 For the Six Months Ended June 30, 2021  For the Six Months Ended June 30, 2022 
 
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total  
Class A
Common
Stock
  
Additional
Paid-in
Capital
  
Treasury
Stock
  
Accumulated
Other
Comprehensive
Loss
  
Retained
Earnings
  Total 
Balance at January 1, 2021
 $91  $579,801  $(1,461,593) $(64,768) $1,840,740  $894,271 
Balance at January 1, 2022
 $91  $601,703  $(1,526,860) $(73,896) $1,911,734  $912,772 
                                                
Net income  0   0   0   0   106,768   106,768   0   0   0   0   72,953   72,953 
Other comprehensive income, net of tax  0   0   0   (3,785)  0   (3,785)
Other comprehensive loss, net of tax  0   0   0   (16,742)  0   (16,742)
Repurchase of Class A common stock (Note 6)  0   0   (60,410)  0   0   (60,410)  0   0   (20,010)  0   0   (20,010)
Exercise of employee stock options (0.5 million shares)/vesting of stock awards
  0   (6,208)  12,136   0   0   5,928 
Exercise of employee stock options (1.1 million shares)/vesting of stock awards
  0   (1,503)  26,101   0   0   24,598 
Stock-based compensation  0   13,383   0   0   0   13,383   0   6,149   0   0   0   6,149 
Cash dividends  0   0   0   0   (38,329)  (38,329)  0   0   0   0   (38,685)  (38,685)
Balance at June 30, 2021
 $91  $586,976  $(1,509,867) $(68,553) $1,909,179  $917,826 
Balance at June 30, 2022
 $91  $606,349  $(1,520,769) $(90,638) $1,946,002  $941,035 

 For the Six Months Ended June 30, 2020  For the Six Months Ended June 30, 2021 
 
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total  
Class A
Common Stock
  
Additional
Paid-in Capital
  
Treasury
Stock
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total 
Balance at January 1, 2020
 $91  $557,544  $(1,324,826) $(85,292) $1,727,772  $875,289 
Balance at January 1, 2021
 $91  $579,801  $(1,461,593) $(64,768) $1,840,740  $894,271 
                                                
Net income  0   0   0   0   61,581   61,581   0   0   0   0   106,768   106,768 
Other comprehensive income, net of tax  0   0   0   (8,149)  0   (8,149)
Other comprehensive loss, net of tax  0   0   0   (3,785)  0   (3,785)
Repurchase of Class A common stock (Note 6)  0   0   (107,367)  0   0   (107,367)  0   0   (60,410)  0   0   (60,410)
Exercise of employee stock options (0.3 million shares)/vesting of stock awards
  0   (2,753)  5,129   0   0   2,376 
Exercise of employee stock options (0.5 million shares)/vesting of stock awards
  0   (6,208)  12,136   0   0   5,928 
Stock-based compensation  0   8,324   0   0   0   8,324   0   13,383   0   0   0   13,383 
Cash dividends  0   0   0   0   (40,042)  (40,042)  0   0   0   0   (38,329)  (38,329)
Balance at June 30, 2020
 $91  $563,115  $(1,427,064) $(93,441) $1,749,311  $792,012 
Balance at June 30, 2021
 $91  $586,976  $(1,509,867) $(68,553) $1,909,179  $917,826 

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(U.S. dollars in thousands)

 
Six Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2021  2020  2022  2021 
Cash flows from operating activities:            
Net income $106,768  $61,581  $72,953  $106,768 
Adjustments to reconcile net income to net cash provided by operating activities:        
Adjustments to reconcile net income to cash flows from operating activities:        
Depreciation and amortization  37,925   37,359   35,764   37,925 
Non-cash lease expense  26,879   22,238   21,978   26,879 
Stock-based compensation  13,383   8,324   6,149   13,383 
Foreign currency losses  2,415   1,347   4,769   2,415 
Loss on disposal of assets  2,189   2,580   212   2,189 
Deferred taxes  3,007   506   4,369   3,007 
Changes in operating assets and liabilities:                
Accounts receivable, net  (2,789)  (13,343)  (6,926)  (2,789)
Inventories, net  (80,224)  9,951   32,213   (80,224)
Prepaid expenses and other  (33,061)  (5,025)  (17,527)  (33,061)
Other assets  (19,897)  (41,168)  4,461   (19,897)
Accounts payable  (4,930)  13,063   10,246   (4,930)
Accrued expenses  (55,429)  62,932   (97,413)  (55,429)
Other liabilities  5,623   5,736   (17,152)  5,623 
Net cash provided by operating activities  1,859   166,081   54,096   1,859 
                
Cash flows from investing activities:                
Purchases of property and equipment  (36,849)  (28,692)  (19,818)  (36,849)
Proceeds on investment sales  7,550   4,234   5,290   7,550 
Purchases of investments  (6,973)  (4,031)  (13,955)  (6,973)
Acquisitions (net of cash acquired)  (18,963)  0 
Acquisitions, net of cash acquired
  0   (18,963)
Net cash used in investing activities  (55,235)  (28,489)  (28,483)  (55,235)
                
Cash flows from financing activities:                
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards  5,928   2,376   24,598   5,928 
Payment of cash dividends  (38,329)  (40,042)  (38,685)  (38,329)
Repurchases of shares of common stock  (60,410)  (107,367)  (20,010)  (60,410)
Finance lease principal payments  (956)  0   (927)  (956)
Payment of debt issuance costs
  (5,077)  0 
Payments of debt  (25,000)  (62,500)  (407,500)  (25,000)
Proceeds from debt  130,000   115,000   460,000   130,000 
Net cash provided by /(used in) financing activities  11,233   (92,533)
Net cash used in financing activities  12,399   11,233 
                
Effect of exchange rate changes on cash  (5,781)  (5,177)  (13,682)  (5,781)
                
Net increase (decrease) in cash and cash equivalents  (47,924)  39,882   24,330   (47,924)
                
Cash and cash equivalents, beginning of period  402,683   335,630   339,593   402,683 
                
Cash and cash equivalents, end of period $354,759  $375,512  $363,923  $354,759 

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements

1.The Company

Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin, being the primary operating unit.  Nu Skin develops and distributes premium-quality, innovative beauty and wellness products that are sold worldwide under the Nu Skin, Pharmanex and ageLOC brands and a small number of other products and services.  The Company reports revenue from 109 segments, consisting of its 7 geographic Nu Skin segments—Americas, which includes Canada, Latin America and the United States; Mainland China; Americas/Southeast Asia/Pacific, which includes Australia, Canada, Latin America,Indonesia, Malaysia, New Zealand, the Philippines, Singapore, Thailand and the United States;Vietnam; South Korea; Japan; Europe, Middle East and Africa (“EMEA”), which includes markets in Europe as well as Israel Russia and South Africa; Japan; Southeast Asia, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam; and Hong Kong/Taiwan, which also includes Macau—and 32 Rhyz Investments segments—Manufacturing, which includes manufacturing and packaging subsidiaries it has acquired; Grow Tech, which focuses on developing controlled-environment agriculture technologies and Rhyz other, which includes other investments by its Rhyz strategic investment arm (the Company’s subsidiaries operating within each segment are collectively referred to as the “Subsidiaries”).

2.Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited consolidated financial statements include the accounts of the Company and its Subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial information as of June 30, 2021,2022, and for the three- andthree-and six-month periods ended June 30, 20212022 and 2020.2021. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. The consolidated balance sheet as of December 31, 20202021 has been prepared using information from the audited financial statements at that date. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K10-K for the year ended December 31, 2020.2021.

Reclassifications
Certain prior period amounts have been reclassified to conform to the current presentation. The Company reclassified $2.7 million and $4.9 million of events and other miscellaneous selling costs from the general and administration expenses line to the sellingexpenses line on the consolidated statement of income for the second quarter and first half of 2021, respectively. The Company believes these costs are better reflected in selling expenses. The reclassification had no impact on operating income for the second quarter or first half of 2021.


Accounting Pronouncements

In March 20202020,, the FASBFinancial Accounting Standards Board (“FASB”) issued, ASU 2020-04,2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for the effects of reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-042020-04 applies only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31,2022. The amendments in ASU 2020-042020-04 are elective and are effective upon issuance for all entities. The Company had previously elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. In the second quarter of 2022, the Company elected the hedge accounting expedient that allows an update to the hedged risk in active hedging relationships without de-designation as the Company’s debt transitioned to Secured Overnight Financing Rate (“SOFR”). Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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Inventory

Inventories consist of the following (U.S. dollars in thousands):

 
June 30,
2021
  
December 31,
2020
  
June 30,
2022
  
December 31,
2021
 
Raw materials $172,411  $118,877  $152,777  $179,891 
Finished goods  218,566   195,489   201,434   220,040 
Total Inventory, net $390,977  $314,366  $354,211  $399,931 

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Revenue Recognition

Contract Liabilities – Customer Loyalty Programs

Contract liabilities, recorded as deferred revenue within the accrued expenses line in the consolidated balance sheets, include loyalty point program deferrals with certain customers which are accounted for as a reduction in the transaction price and are generally recognized as points are redeemed for additional products.

The balance of deferred revenue related to contract liabilities as of June 30, 20212022 and December 31, 20202021 was $23.818.4 million million and $18.222.0 million million,, respectively. The contract liabilities impact to revenue for the three-monththree-month periods ended June 30, 2021,2022, and 20202021 was an increase of $2.4 million and a decrease of $4.0 million, and a decrease of $4.1 million, respectively. The impact to revenue for the six-month periods ended June 30, 2022, and 2021 and 2020 was a decreasean increase of $5.6$3.6 million and  a decrease of $3.5$5.6 million, respectively.respectively.

3.Goodwill

The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments.

The following table presents goodwill allocated to the Company’s reportable segments for the periods ended June 30, 20212022 and December 31, 20202021 (U.S. dollars in thousands):

 
June 30,
2021
  
December 31,
2020
 
Nu Skin      
Mainland China $32,179  $32,179 
Americas/Pacific  9,449   9,449 
South Korea  29,261   29,261 
EMEA  2,875   2,875 
Southeast Asia  18,537   18,537 
Japan  16,019   16,019 
Hong Kong/Taiwan  6,634   6,634 
Rhyz Investments        
Manufacturing  78,875   78,875 
Grow Tech  9,150   9,150 
Rhyz Other  12,603   0 
Total $215,582  $202,979 
 
June 30,
2022
  
December 31,
2021
 
Nu Skin      
Americas $9,449  $9,449 
Mainland China  32,179   32,179 
Southeast Asia/Pacific  18,537   18,537 
South Korea  29,261   29,261 
Japan
  16,019   16,019 
EMEA  2,875   2,875 
Hong Kong/Taiwan  6,634   6,634 
Rhyz Investments        
Manufacturing  78,875   78,875 
Rhyz Other  12,603   12,603 
Total $206,432  $206,432 

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4.Debt

2018 Credit Agreement

On April 18, 2018, the Company entered into a Credit Agreement (the “Credit“2018 Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent. The 2018 Credit Agreement providesprovided for a $400 million term loan facility and a $350 million revolving credit facility, each with a term of five years. Both facilities bearbore interest at the LIBOR, plus a margin based on the consolidated leverage ratio. The term loan facility amortizesamortized in quarterly installments in amounts resulting in an annual amortization of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year after the closing date of the 2018 Credit Agreement, with the remainder payable at final maturity. The 2018 Credit Agreement requiresrequired the Company to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00.

Credit Agreement

On June 14, 2022, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2018 Credit Agreement. The Credit Agreement provides for a $400 million term loan facility and a $500 million revolving credit facility, each with a term of five years.  Both facilities bear interest at the SOFR, plus a margin based on the Company’s consolidated leverage ratio. Commitment fees payable under the Credit Agreement are also based on the consolidated leverage ratio as defined in the Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect.  The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the second, third, fourth and fifth years after the closing date of the Credit Agreement, with the remainder payable at final maturity. The Credit Agreement is guaranteed by certain of the Company's domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of June 30, 2021,2022, the Company was in compliance with all covenants under the Credit Agreement.

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The following table summarizes the Company’s debt facilities as of June 30, 20212022 and December 31, 2020:2021:

Facility or Arrangement 
Original
Principal Amount
 
Balance as of
June 30, 20212022 (1)(2)
 
Balance as of
December 31, 2020 2021(1)(2)
 Interest Rate Repayment Terms
2018 Credit Agreement term loan facility
$400.0 million

0$
307.5 million
Variable 30 day: 2.80%
Principal amount was paid in full during June 2022.
2018 Credit Agreement revolving credit facility
0$ 70.0 million
Variable 30 day: 2.72%
Principal amount was paid in full during June 2022 and credit line was closed.

Credit Agreement term loan facility $400.0 million $
322.5400.0 million
 
 $
337.5 million0
 
Variable 30 day: 1.85%3.11%
 
35%21% of the principal amount is payable in increasing quarterly installments over a five-year period that beganbegins on JuneSeptember 30, 2018,2022, with the remainder payable at the end of the five-year term.
              
Credit Agreement revolving credit facility    $120.030.0 million 
0
 
Variable 30 day: 1.84%3.11%
 Revolving line of credit expires April 18, 2023.June 14, 2027.

(1)As of June 30, 20212022 and December 31, 2020,2021, the current portion of the Company’s debt (i.e. becoming due in the next 12 months) included $32.5$10.0 million and $30.0$37.5 million, respectively, of the balance of its term loan under the Credit Agreement and 2018 Credit Agreement.

(2)
The carrying value of the debt reflects the amounts stated in the above table, less debt issuance costs of $1.7$2.8 million and $2.11.2 million as of June 30, 20212022 and December 31, 2020,2021, respectively, related to the Credit Agreement and 2018 Credit Agreement, which are not reflected in this table.

5.Leases

As of June 30, 2021,2022, the weighted average remaining lease term was 6.68.2 and 4.23.3 years for operating and finance leases, respectively. As of June 30, 2021,2022, the weighted average discount rate was 4.0%3.6% and 3.8% for operating and finance leases, respectively.

The components of lease expense were as follows (U.S. dollars in thousands):

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2021  2020  2021  2020  2022  2021  2022  2021 
Operating lease expense                        
Operating lease cost $12,400  $12,869  $25,215  $26,005  $10,261  $12,400  $20,700  $25,215 
Variable lease cost  1,656   410   3,024   1,384   1,494   1,656   2,651   3,024 
Short-term lease cost  238   95   577   140   67   238   97   577 
Sublease income  (1,828)  (1,058)  (3,812)  (2,189)  0   (1,828)  0  (3,812)
Finance lease expense                                
Amortization of right-of-use assets  606   0   1,217   0   546   606   1,102   1,217 
Interest on lease liabilities  83   0   171   0   59   83   125   171 
Total lease expense
 $13,155  $12,316  $26,392  $25,340  $12,427  $13,155  $24,675  $26,392 

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Supplemental cash flow information related to leases was as follows (U.S. dollars in thousands):

 
Six Months Ended
June 30,
  
Six Months Ended
June 30,
 
 2021  2020  2022  2021 
Operating cash outflow from operating leases $27,470  $25,955  $19,895  $27,470 
Operating cash outflow from finance leases $173  $0  $128  $173 
Financing cash outflow from finance leases $956  $0  $927  $956 
Right-of-use assets obtained in exchange for operating lease obligations $13,729  $31,178  $25,793  $13,729 
Right-of-use assets obtained in exchange for finance lease obligations $59  $0  $0  $59 

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Maturities of lease liabilities were as follows (U.S. dollars in thousands):

Year Ending December 31 
Operating
Leases
  
Finance
Leases
  
Operating
Leases
  
Finance
Leases
 
2021 $24,079  $1,109 
2022  34,753   2,230  $18,364  $997 
2023  24,074   2,148   26,495   1,926 
2024  18,965   2,035   19,945   1,823 
2025  14,237   1,436   14,381   1,296 
2026  8,387   261 
Thereafter  41,227   262   49,038   0 
Total  157,335   9,220   136,610   6,303 
Less: Finance charges  19,479   722   17,990   393 
Total principal liability $137,856  $8,498  $118,620  $5,910 

The Company has additional lease liabilities of $3.60.3 million which have not yet commenced as of JuneJune 30, 20212022, and as such, have not been recognized on the consolidated balance sheets.

6.Capital Stock

Net income per share

Net income per share is computed based on the weighted-average number of common shares outstanding during the periods presented. Additionally, diluted earnings per share data gives effect to all potentially dilutive common shares that were outstanding during the periods presented. For the three-monththree-month periods ended June 30, 20212022 and 2020,2021, stock options of 0.1 million and 1.00.1 million, respectively, and for the six-month periods ended June 30, 20212022 and 2020,2021, stock options of 0.1 million and 0.90.1 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Dividends

In February and May 20212022, the Company’s board of directors declared quarterly cash dividends of $0.38$0.385 per share. These quarterly cash dividends of $19.3$19.3 million and $19.0$19.4 million were paid on March 10, 20219, 2022 and June 9, 20218, 2022, respectively, to stockholders of record on February 26, 202128, 2022 and May 28, 2021.27, 2022, respectively. In August 20212022, the Company’s board of directors declared a quarterly cash dividend of $0.38$0.385 per share to be paid on September 8, 20217, 2022 to stockholders of record on August 27, 2021.

26, 2022.

Repurchase of common stock

During the three-month periods ended June 30, 20212022 and 2020,2021, the Company repurchased 0.2million and 1.7 million shares of its Class A common stock under its stock repurchase plan for $10.0 million and $46.5 million, respectively. During the six-month periods ended June 30, 2021 and 2020, the Company repurchased 1.2 million shares and 4.40.2 million shares of its Class A common stock under its stock repurchase plan for $60.4$10.0 million and $107.4$10.0 million, respectively. During the six-month periods ended June 30, 2022 and 2021, the Company repurchased 0.4 million shares and 1.2 million shares of its Class A common stock under its stock repurchase plan for $20.0 million and $60.4 million, respectively.As of June 30, 2021, $2022,265.4 $225.4 million was available for repurchases under the Company’s stock repurchase plan.

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7.Fair Value and Equity Investments

Fair Value

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair values due to the short-term nature of these instruments. The carrying value of debt approximates fair value due to the variable 30-day interest rate. Fair value estimates are made at a specific point in time, based on relevant market information.

The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

◾■Level 1 – quoted prices in active markets for identical assets or liabilities;
◾■Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
◾■Level 3 – unobservable inputs based on the Company’s own assumptions.

Accounting standards permit companies, at their option, to measure certain financial instruments and other eligible items at fair value. The Company has elected not to apply the fair value option to existing eligible items beyond what is required by US GAAP.

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The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (U.S. dollars in thousands):

 Fair Value at June 30, 2021  Fair Value at June 30, 2022 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Financial assets (liabilities):                        
Cash equivalents and current investments $69,414  $0  $0  $69,414  $111,099  $0  $0  $111,099 
Derivative financial instruments asset  0   4,304   0   4,304   0   16,376   0   16,376 
Life insurance contracts  0   0   49,061   49,061   0   0   40,201   40,201 
Derivative financial instruments liability  0   (97)  0   (97)
Contingent consideration  0   0   (12,030)  (12,030)  0   0   (8,591)  (8,591)
Total $69,414  $4,207  $37,031  $110,652  $111,099  $16,376  $31,610  $159,085 

 Fair Value at December 31, 2020  Fair Value at December 31, 2021 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Financial assets (liabilities):                        
Cash equivalents and current investments $56,628  $0  $0  $56,628  $66,477  $0  $0  $66,477 
Derivative financial instruments asset  0   1,145   0   1,145   0   6,590   0   6,590 
Life insurance contracts  0   0   45,453   45,453   0   0   49,851   49,851 
Derivative financial instruments liability  0   (105)  0   (105)
Contingent consideration  0   0   (3,125)  (3,125)  0   0   (10,341)  (10,341)
Total $56,628  $1,040  $42,328  $99,996  $66,477  $6,590  $39,510  $112,577 

The following table provides a summary of changes in fair value of the Company’s Level 3 life insurance contracts (U.S. dollars in thousands):

Beginning balance at January 1, 2021
 $45,453 
 2022  2021 
Beginning balance at January 1 $49,851  $45,453 
Actual return on plan assets  3,608   (9,650)  3,608 
Purchase and issuances  7,016 
Purchases and issuances  0   7,016 
Sales and settlements  (7,016)  0   (7,016)
Transfers into Level 3  0   0   0 
Ending balance at June 30, 2021
 $49,061 
Ending balance at June 30 $40,201  $49,061 

Life insurance contracts: ASCAccounting Standards Codification (“ASC”) 820 preserves practicability exceptions to fair value measurements provided by other applicable provisions of U.S. GAAP. The guidance in ASC 715-30-35-60 allows a reporting entity, as a practical expedient, to use cash surrender value or conversion value as an expedient for fair value when it is present. Accordingly, the Company determines the fair value of its life insurance contracts as the cash-surrender value of life insurance policies held in its Rabbi TrustTrust.
 
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The following table provides a summary of changes in fair value of the Company’s Level 3 contingent consideration (U.S. dollars in thousands):

Beginning balance at January 1, 2021
 $(3,125)
 2022  2021 
Beginning balance at January 1 $(10,341) $(3,125)
Additions from acquisitions  (8,702)  0   (8,702)
Changes in fair value of contingent consideration  (203)  1,750   (203)
Ending balance at June 30, 2021
 $(12,030)
Ending balance at June 30 $(8,591) $(12,030)

Contingent consideration: Contingent consideration represents the obligations incurred in connection with acquisitions. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding the future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on significant inputs unobservable in the market and thus represents a levelLevel 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or decrease in the fair value of the contingent consideration obligation.

11
Equity Investments

The Company maintains equity investments in companies which are accounted for under the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. The carrying amount of equity securities held by the Company without readily determinable fair values was $28.1 million at each of June 30,2022 and December 31,2021. During the three months ended September 30,2021 the Company recognized $18.1 million upward fair value adjustments, based on the valuation of additional equity issued by the investee which was deemed to be an observable transaction of a similar investment under ASC 321. The third quarter of 2021 gain was recorded within Other income (expense), net on the Consolidated Statement of Comprehensive Operations. The upward fair value adjustment represents a nonrecurring fair value measurement based on observable price changes and is classified as a Level 3 fair value measurement.

8.Income Taxes

Provision for income taxes for the three- and six-month periods of 2021ended June 30, 2022 was $8.7 million and $20.6 million, compared to $22.0 million and $39.1 million, compared to $17.8 million and $28.5 million for the prior-year periods. The effective tax rates for the three- and six-month periods ended June 30, 2022 were 27.1%20.2% and 26.8%22.0% of pre-tax income compared to 29.8%27.1% and 31.6%26.8% in the prior-year periods.

The Company accounts for income taxes in accordance with ASC Topic 740 “Income Taxes.” These standards establish financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. The Company takes an asset and liability approach for financial accounting and reporting of income taxes. The Company pays income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between the Company and its foreign affiliates. Deferred tax assets and liabilities are created in this process. The Company has netted these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. The Company had net deferred tax assets of $27.1$21.3 million and $34.8$24.1 million as of June 30, 20212022 and December 31, 2020,2021, respectively.

The Company evaluates its indefinite reinvestment assertions with respect to foreign earnings for each quarter. For all foreign earnings, the Company accrues the applicable foreign income taxes. For the earnings that have been indefinitely reinvested, the Company does not accrue foreign withholding taxes. Undistributed earnings that the Company has indefinitely reinvested, for which no foreign withholding taxes have been provided, aggregate to $60.0 million as of December 31, 2020.2021. If the amount designated as indefinitely reinvested as of December 31, 20202021 was repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.  The Company intends to utilize the indefinitely reinvested offshore earnings to fund foreign investments, specifically capital expenditures.

The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company is no longer subject to tax examinations from the IRS for all years for which tax returns have been filed before 2020. With a few exceptions, the Company is no longer subject to state and local income tax examination by tax authorities for the years before 2017. In 2009, the Company entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. As of December 31, 2021, tax years through 2020 have been audited and are effectively closed to further examination. For tax years 2021 and 2022, the Company is in the Bridge phase of the CAP program, pursuant to which the IRS will not accept disclosures, will not conduct reviews and will not provide letters of assurance for the Bridge years. There are limited circumstances under which tax years in the Bridge phase will be opened for examination. The Company has elected to participate in CAP for 2021 and may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time. With a few exceptions, the Company is no longer subject to state and local income tax examination by tax authorities for the years before 2018. In major foreign jurisdictions, the Company is generally no longer subject to income tax examinations for years before 2015.2016. However, statutes of limitations in certain countries may be as long as ten years.years. The Company is currently under examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable.  The Company’s unrecognized tax benefits relate to multiple jurisdictions. Due to potential increases in unrecognized tax benefits from the multiple jurisdictions in which the Company operates, as well as the expiration of various statutes of limitations, it is reasonably possible that the Company’s gross unrecognized tax benefits, net of foreign currency adjustments, may decreaseincrease in the next 12 months by approximately $0.1$2.0 to $1.0$3.0 million.

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9.Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

12
Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-ratevariable-rate amounts from a counterparty in exchange for the Company making variable-ratefixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2021,2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense/income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense/income as interest payments are made/received on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $97 thousand$5.8 million will be reclassified as an increasea reduction to interest expense.

As of June 30, 20212022 and December 31, 2020,2021, the Company had 4 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk with a total notional amount of $200 million.

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet:

   Fair Values of Derivative Instruments   
Fair Values of
Derivative Instruments
 
Derivatives in Cash flow
Hedging Relationships:
 
Balance Sheet
Location
 
June 30,
2021
 
December 31,
2020
 
Balance Sheet
Location
 
June 30,
2022
  
December 31,
2021
 
Interest Rate Swap - Asset Other Assets $4,304 $1,145 Prepaid expenses and other $5,830  $557 
Interest Rate Swap - Liability Accrued Expenses $97 $105
Interest Rate Swap - Asset
 Other assets $10,546  $6,033 

Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income

The tables below present the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income.

 Amount of Gain or (Loss) Recognized in OCI on Derivative 
Amount of Gain (Loss)
Recognized in OCI on Derivatives
 
 Three Months Ended Six Months Ended Three Months Ended  Six Months Ended 
Derivatives in Cash flow June 30, June 30, June 30,  June 30, 
Hedging Relationships: 2021 2020 2021 2020 2022  2021  2022  2021 
Interest Rate Swaps $(778) $0 $3,101 $0 $2,014  $(778) $10,071  $3,101 

   
Amount of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Loss into Income
    Three Months Ended Six Months Ended
Derivatives in Cash flow Income Statement June 30, June 30,
Hedging Relationships: Location 2021 2020 2021 2020
Interest Rate Swaps Other Income $(38) $0 $(65) $0
   
Amount of Gain (Loss)
Reclassified from Accumulated
Other Comprehensive Loss into Income
 
       Three Months Ended  Six Months Ended 
Derivatives in Cash flow Income Statement June 30,  June 30, 
Hedging Relationships: Location 2022  2021  2022  2021 
Interest Rate Swaps Other income (expense), net
 $301 $(38) $283 
$
(65
)

15
Table of Contents
10.Segment Information

The Company reports revenue from 109 segments, consisting of its 7 geographic Nu Skin segments—Americas, Mainland China, Americas/Southeast Asia/Pacific, South Korea, Southeast Asia, Japan, EMEA, and Hong Kong/Taiwan—and 32 Rhyz Investments segments -Manufacturing, Grow Techsegments—Manufacturing and Rhyz other. The Nu Skin other category includes miscellaneous corporate revenue and related adjustments. The Rhyz other categorysegment includes other investments by our Rhyz strategic investment arm. These segments reflect the way the chief operating decision maker evaluates the Company’s business performance and allocates resources. Reported revenue includes only the revenue generated by sales to external customers.

13
Profitability by segment as determined under US GAAP is driven primarily by the Company’s transfer pricing policies. Segment contribution, which is the Company’s segment profitability metric presented in the table below, excludes certain intercompany charges, specifically royalties, license fees, transfer pricing, discrete charges and other miscellaneous items. These charges have been included in Corporate and other expenses. Corporate and other expenses also include costs related to the Company’s executive and administrative offices, information technology, research and development, and marketing and supply chain functions not recorded at the segment level.

In the first quarter of 2021, as a result of a change in the Company’s transfer pricing policies in the Americas/Pacific, the
Prior year segment contribution calculation has been adjusted. The prior year Americas/Pacific and Corporate and otherinformation has been recast to conformreflect the move of the Pacific components from the “America/Pacific” operating segment to the “Southeast Asia/Pacific” operating segment to comply with current segment presentation. Prior year segment information has been recast to reflect the new policy.fourth quarter 2021 exit of the Grow Tech segment, which has been recast to Corporate and other expenses. Consolidated financial information is not affected.

The accounting policies of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies. The Company evaluates the performance of its segments based on revenue and segment contribution. Each segment records direct expenses related to its employees and its operations.

Summarized financial information for the Company’s reportable segments is shown in the following tables. Asset information is not reviewed or included with the Company’s internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.

Revenue by Segment

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
(U.S. dollars in thousands) 2021  2020  2021  2020  2022  2021  2022  2021 
            
Nu Skin                        
Americas
 $
124,445  $
138,512  $
248,025  $
272,273 
Mainland China $154,182  $146,332  $303,775  $284,028  
86,808  
154,182  
211,303  
303,775 
Americas/Pacific  151,730   127,919   301,195   202,492 
Southeast Asia/Pacific  94,067   83,968   184,303


167,257 
South Korea  88,604   76,915   169,735   152,634   69,308   88,604   141,441   169,735 
Japan
  55,952   68,020   117,743   137,884 
EMEA  83,115   50,776   159,295   86,179   50,871   83,115   103,839   159,295 
Southeast Asia  70,751   66,829   138,336   136,415 
Japan  68,020   68,291   137,884   129,591 
Hong Kong/Taiwan  38,529   37,161   74,874   72,988   39,327   38,529   77,821   74,874 
Nu Skin other  755   (85)  1,460   688   1,318
   947
  1,938
   1,825
 
Total Nu Skin  655,686   574,138   1,286,554   1,065,015   522,096   655,877   1,086,413   1,286,918 
Rhyz Investments                                
Manufacturing (1)
  48,140   37,918   94,125   65,065   38,229   48,140   78,570   94,125 
Grow Tech  191   310   364   314 
Rhyz other  38   0   38   0   290
   38
   531
   38
 
Total Rhyz Investments  48,369   38,228   94,527   65,379   38,519   48,178   79,101   94,163 
Total $704,055  $612,366  $1,381,081  $1,130,394  $560,615  $704,055  $1,165,514  $1,381,081 

(1)
The Manufacturing segment had $23.2$16.7 million and $6.9$23.2 million of intersegment revenue for the three months ended June 30, 20212022 and 2020,2021, respectively, and $40.6$31.3 million and $13.3$40.6 million for the six months ended June 30, 20212022 and 2020,2021, respectively. Intersegment revenue is eliminated in the consolidated financial statements, as well as the reported segment revenue in the table above.
above.

16
Table of Contents
Segment Contribution

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
(U.S. dollars in thousands) 2021  2020  2021  2020  2022  2021  2022  2021 
Nu Skin                        
Americas
 $30,026  $28,998  $55,149  $57,743 
Mainland China $51,480  $43,668  $90,919  $81,055   12,945   51,480   41,940   90,919 
Americas/Pacific  32,106   25,791   64,250   37,071 
Southeast Asia/Pacific
  24,367   21,213   47,773   40,861 
South Korea  28,892   24,090   55,417   48,189   20,578   28,892   43,321   55,417 
Japan  13,451   16,461   28,764   34,442 
EMEA  13,681   3,342   22,577   3,973   6,162   13,681   9,998   22,577 
Southeast Asia  18,105   16,977   34,354   33,695 
Japan  16,461   16,455   34,442   31,047 
Hong Kong/Taiwan  8,560   6,839   15,908   13,777   9,161   8,560   17,851   15,908 
Nu Skin contribution  169,285   137,162   317,867   248,807   116,690   169,285   244,796   317,867 
Rhyz Investments                                
Manufacturing  6,764   5,402   12,590   8,251   1,188   6,764   4,480   12,590 
Grow Tech  (6,980)  (5,487)  (13,071)  (12,337)
Rhyz other  (519)  0   (519)  0   (1,299)  (519)  (2,345)  (519)
Rhyz Investments contribution  (735)  (85)  (1,000)  (4,086)  (111)  6,245   2,135   12,071 
Total segment contribution  168,550   137,077   316,867   244,721   116,579   175,530   246,931   329,938 
Corporate and other  (83,174)  (79,003)  (168,578)  (150,082)  (65,052)  (90,154)  (143,259)  (181,649)
Operating income  85,376   58,074   148,289   94,639   51,527   85,376   103,672   148,289 
Other income (expense)  (4,012)  1,581   (2,430)  (4,593)  (8,640)  (4,012)  (10,093)  (2,430)
Income before provision for income taxes $81,364  $59,655  $145,859  $90,046  $42,887  $81,364  $93,579  $145,859 

14
Depreciation and Amortization

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
(U.S. dollars in thousands) 2021  2020  2021  2020  2022  2021  2022  2021 
Nu Skin                        
Americas
 $
192  $
235  $
391  $
466 
Mainland China $3,276  $2,558  $6,615  $4,982  
2,676  
3,276  
5,560  
6,615 
Americas/Pacific  273   253   529   498 
Southeast Asia/Pacific
  381   383   762   737 
South Korea  973   918   1,963   1,975   372   973   760   1,963 
Japan
  245   226   522   479 
EMEA  283   242   569   500   244   283   474   569 
Southeast Asia  345   444   674   931 
Japan  226   834   479   1,306 
Hong Kong/Taiwan  905   618   1,790   1,257   718   905   1,409   1,790 
Total Nu Skin  6,281   5,867   12,619   11,449   4,828   6,281   9,878   12,619 
Rhyz Investments                                
Manufacturing  2,887   2,062   5,575   3,877   3,282   2,887   6,612   5,575 
Grow Tech  1,360   1,248   2,699   2,473 
Rhyz other  395   0   395   0   592   395   1,184   395 
Total Rhyz Investments  4,642   3,310   8,669   6,350   3,874   3,282   7,796   5,970 
Corporate and other  8,658   9,087   16,637   19,560   9,932   10,018   18,090   19,336 
Total $19,581  $18,264  $37,925  $37,359  $18,634  $19,581  $35,764  $37,925 

17
Table of Contents
Capital Expenditures

 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
(U.S. dollars in thousands) 2021  2020  2021  2020  2022  2021  2022  2021 
Nu Skin                        
Americas
 $
87  $
87  $
129  $
199 
Mainland China $3,416  $716  $11,933  $3,577  
2,052  
3,416  
6,120  
11,933 
Americas/Pacific  102   72   380   766 
Southeast Asia/Pacific  56   358   124   923 
South Korea  18   195   508   364   216   18   578   508 
Japan  184   0   184   91 
EMEA  258   633   430   660   385   258   778   430 
Southeast Asia  343   6   742   639 
Japan  0   1,491   91   1,648 
Hong Kong/Taiwan  112   12   112   16   536   112   799   112 
Total Nu Skin  4,249   3,125   14,196   7,670   3,516   4,249   8,712   14,196 
Rhyz Investments                                
Manufacturing  5,662   603   9,000   11,108   1,222   5,662   2,430   9,000 
Grow Tech  61   239   1,003   417 
Rhyz other  0   0   0   0   0   0   0   0 
Total Rhyz Investments  5,723   842   10,003   11,525   1,222   5,662   2,430   9,000 
Corporate and other  7,504   5,338   12,650   9,497   4,801   7,565   8,676   13,653 
Total $17,476  $9,305  $36,849  $28,692  $9,539  $17,476  $19,818  $36,849 

15
11.Commitments and Contingencies

The Company is subject to government regulations pertaining to product formulation, labeling and packaging, product claims and advertising, and the Company’s direct selling system.  The Company is also subject to the jurisdiction of numerous foreign tax and customs authorities. Any assertions or determination that either the Company or the Company’s sales force is not in compliance with existing statutes, laws, rules or regulations could have a material adverse effect on the Company’s operations. In addition, in any country or jurisdiction, the adoption of new statutes, laws, rules or regulations or changes in the interpretation of existing statutes, laws, rules or regulations could have a material adverse effect on the Company and its operations. No assurance can be given that the Company’s compliance with applicable statutes, laws, rules and regulations will not be challenged by foreign authorities or that such challenges will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company and its Subsidiaries are defendants in litigation, investigations and other proceedings involving various matters. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. The Company believes it has appropriately provided for income taxes for all years. Several factors drive the calculation of its tax reserves. Some of these factors include: (i) the expiration of various statutes of limitations; (ii) changes in tax law and regulations; (iii) issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to the Company’s reserves, which would impact its reported financial results.

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Table of Contents
12.Acquisitions

In December 2020, the Company acquired 100% of the outstanding equity interest of Ingredient Innovations International Company (“3i”). The purchase price for 3i was $15.7 million, net of cash acquired of $2.1 million and $0.8 million to be paid within six months, all payable in cash. In addition, there is potential for an incremental $7.0 million in contingent consideration, which becomes payable if certain performance targets are reached in 2021 and 2022. The fair value of the contingent consideration recorded on the acquisition date is $3.1 million. The Company allocated the gross purchase price of $24.5 million to the assets acquired and liabilities assumed at estimated fair values. The estimated fair value of assets acquired included $14.4 million of intangible assets, $0.3 million of property and equipment, $2.1 million of cash, $0.8 million of accounts receivable and less than $0.3 million of inventory, and the acquisition also included approximately $0.3 million of current liabilities and resulted in a deferred tax liability of $3.1 million. The excess purchase price over the aggregate fair value of assets acquired less liabilities assumed of $6.4 million was recorded as goodwill. The intangible assets acquired were comprised of $3.7 million for Customer relationships, $10.0 million for technology and $0.7 million for other intangibles, all with an assigned estimated useful life of approximately 8 years. All the goodwill was assigned to our Manufacturing segment. The allocation of the fair value of assets acquired and liabilities assumed for the acquisition was finalized during the three months ended March 31, 2021.

In April 2021, the Company acquired 100% ownership in MyFavoriteThings, Inc. (“MyFavoriteThings”Mavely”), making MyFavoriteThingsMavely a wholly owned subsidiary of the Company. The acquisition enables the Company to continue to expand its digital tools. The purchase price for MyFavoriteThingsMavely was $16.8 million, net of cash acquired of $0.4 million and $0.9 million to be paid within six months, all payable in cash. In addition, there is potential for an incremental $24.0 million in contingent consideration, which becomes payable if certain revenue and profitability targets are reached in 2021, 2022 and 2023. The fair value of the contingent consideration recorded on the acquisition date iswas $8.7 million. The Company allocated the gross purchase price of $29.4 million to the assets acquired and liabilities assumed at estimated fair values. The estimated fair value of assets acquired included $16.4 million of intangible assets, $0.4 million of cash, $0.1 million of accounts receivable, and also resulted in a deferred tax liability of $3.5 million. The excess purchase price over the aggregate fair value of assets acquired less liabilities assumed of $12.6 million was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies. None of the goodwill is expected to be deductible for income tax purposes. The intangible assets acquired were comprised of $2.0 million for customer relationships, $11.3 million for technology, $2.8 million for tradenamestrademarks and $0.3 million for other intangibles. The intangibles were assigned useful lives of 8 years for the technology and tradenames,tradename, approximately 4 years for the customer relationships and 3 years for the other intangibles. All the goodwill was assigned to our Rhyz other segment. The allocation of the fair value of assets acquired and liabilities assumed for the acquisition was finalized during the three months ended September 30, 2021.

13.Restructuring

In the fourth quarter of 2021, the Company determined to exit the Grow Tech segment, to better align its resources on key strategic initiatives to achieve the future growth objectives and priorities of the core Nu Skin business. The Grow Tech segment was pursuing the commercialization of controlled-environment agriculture for use in the agriculture feed industry. This segment had been operating as part of the Company’s Rhyz strategic investment arm. As a result of the restructuring program, the Company recorded a non-cash charge of $38.5 million in 2021, including $9.2 million for impairment of goodwill, $9.0 million for impairment of intangibles, $13.7 million of fixed asset impairments and $6.6 million for inventory write-off, and $20.0 million of cash charges, including $6.5 million for employee severance and $13.5 million for other related cash charges with our restructuring. As of December 31, 2021, the $20.0 million liability related to cash charges was recorded within Accrued expenses. During the first quarter of 2022, the Company made cash payments of $11.6 million, leaving an ending restructuring accrual of $8.3 million as of March 31, 2022. During the second quarter of 2022, the Company made cash payments of $8.0 million, leaving an ending restructuring accrual of $0.3 million as of June 30, 20212022. The Company expects to pay out the allocationremaining liability in the third quarter of 2022. The restructuring charges were recorded in the purchase price forprevious Grow Tech segment, which in the acquisitioncurrent year has been recast to Corporate and Other.

14.Subsequent Events

In August of MyFavoriteThings is not yet finalized and is subject to adjustments as2022, the Company completesadopted a strategic plan to focus resources on the valuation analysis for this acquisition.Company’s strategic priorities and optimize future growth and profitability. The global program includes workforce reductions and footprint optimization. The Company estimates total charges under the program will approximate $35–$45 million, with $30–$35 million in cash charges of severance and lease termination cost and $5–$10 million of non-cash charges of impairment of fixed assets related to the footprint optimization. The Company expects to substantially complete the program during the back half of 2022.


19
16
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent our current expectations and beliefs.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws and include, but are not limited to, statements of management’s expectations regarding our performance, initiatives, strategies, product introductions and offerings, growth, opportunities and risks; statements of projections regarding future sales, expenses, operating results, taxes and duties, capital expenditures, sources and uses of cash, foreign-currency fluctuations or devaluations, repatriation of undistributed earnings, and other financial items; statements of management’s expectations and beliefs regarding our markets and global economic conditions; statements regarding the payment of future dividends and stock repurchases; statements regarding the outcome of litigation, audits, investigations or other regulatory actions; statements regarding government policies and regulations relating to our industry, including government policies and regulations in Mainland China; accounting estimates and assumptions; statements of belief; and statements of assumptions underlying any of the foregoing. In some cases, you can identify these statements by forward-looking words such as “believe,” “expect,” “optimistic,” “project,” “anticipate,” “determine,” “estimate,” “intend,” “plan,” “goal,” “objective,” “targets,” “become,” “likely,” “will,” “would,” “could,” “may,” “might,” the negative of these words and other similar words. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.  We caution and advise readers that these statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results to differ materially from the expectations and beliefs contained herein. For a summary of these risks, see the risk factors included in our Annual Report on Form 10-K for the 20202021 fiscal year and in our subsequent quarterly and other reports, including this Quarterly Report.

The following Management’s Discussion and Analysis should be read in conjunction with our consolidated financial statements and related notes and Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the 20202021 fiscal year, and our other reports filed with the Securities and Exchange Commission through the date of this Quarterly Report.

Overview

Revenue for the three-month period ended June 30, 2021 increased 15%2022 decreased 20% to $704.1$560.6 million, compared to $612.4$704.1 million in the prior-year period, and revenue for the six-month period ended June 30, 2021 increased 22%2022 decreased 16% to $1.4$1.2 billion, compared to $1.1$1.4 billion in the prior-year period. Our revenue in the second quarter and first half of 2022 was negatively impacted 5% and 4%, respectively, from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders increased 15%declined 6%, 16% and Customers decreased 2%24%, respectively, on a year-over-year basis. Our reported revenue benefited 6% from foreign-currency fluctuations for both periods presented of 2021.

Our results continue to benefit from our strategic shift to become a more digital business with continued growth from social commerce,second quarter and our Sales Leaders have been able to leverage the powerfirst half of social sharing to achieve greater levels of productivity.  If and when the COVID-19 pandemic subsides, there is uncertainty as2022 revenue was softer than anticipated primarily driven by COVID-related factors in Mainland China, distractions in EMEA related to the impact on trends towards online shoppingongoing conflict in Russia and how our business would be impacted by changes in those trends. Our 15% revenue growth was driven by solid growth in our Americas/Pacific and EMEA segments, where our Brand Affiliates have more broadly adopted social commerce to share our products. The pandemic negatively impacted our Asia markets more heavily, as our sales force generally relies more on in-person meetings in those marketsUkraine, and the social sharing model is less mature.  Our revenuegeneral global economic downturn.  Despite these continuing headwinds, we are optimistic about our EmpowerMe personalized beauty and Sales Leaders also benefitted from Sales Leaders initiatives duringwellness strategy with the quarter. Our Customers declined 2%, primarily due to a significant surge in the prior year. We are continuing theexpected launch of the ageLOC Boost;LumiSpa iO at the date of this report, the Boost is now generally available for purchase in all of our eastern markets, with EMEA and US slated for the back half of 2021. Also, in the back half of the year, we are beginning our launch process of our two new products Beauty Focus Collagen+ and ageLOC Meta, with both being generally available for purchase in 2022.year.

Earnings per share for the second quarter of 2021 increased2022 decreased 42% to $1.15,$0.67, compared to $0.81$1.15 in the prior-year period. Earnings per share for the first six months of 2021 increased 79%2022 decreased 31% to $2.06,$1.43, compared to $1.15$2.06 in the prior-year period. The increasedecrease in earnings per share for the second quarter and first half of 2022 was primarily driven by the increasedecrease in revenue improvedalong with a decline in gross margin from lower freight expense as a percentage of revenue and favorable product mix, and a decrease in selling expense as a percent of revenue. The increase in earnings per share for the first half of 2021 was driven by the increase in revenue and fixed nature of general and administrative expenses on the increased revenue.sales promotions.

In August 2022, management approved a restructuring plan for the second half of 2022. The charges are expected to be approximately $30 million for the third quarter of 2022 and $35–$45 million for the second half of 2022. These charges will predominantly be recorded in restructuring and impairment, as part of operating income. The plan includes approximately $30–$35 million of cash charges related to severance and lease termination cost and approximately $5–$10 million of non-cash impairment charges of fixed assets related to the footprint optimization.
20
17
Segment Results

We report our business in tennine segments to reflect our current management approach. These segments consist of our seven geographic Nu Skin segments—Americas, Mainland China, Americas/Southeast Asia/Pacific, South Korea, Southeast Asia, Japan, EMEA, and Hong Kong/Taiwan, and EMEA—Taiwan—and our three Rhyz Investment segments—Manufacturing Grow Tech and Rhyz other. The Nu Skin other category includes miscellaneous corporate revenue and related adjustments. The Rhyz other categorysegment includes other investments by our Rhyz strategic investment arm, which were entered into during the second quarter of 2021.

The following table sets forth revenue for the three- and six-month periods ended June 30, 20212022 and 20202021 for each of our reportable segments (U.S. dollars in thousands):

 
Three Months Ended
June 30,
     
Constant-
Currency
  
Six Months Ended
June 30,
     
Constant-
Currency
 
 2021  2020  Change  
Change (1)
  2021  2020  Change  
Change (1)
  
Three Months Ended
June 30,
   
Constant-
Currency
  
Six Months Ended
June 30,
   
Constant-
Currency
 
                         2022 2021 Change  
Change(1)
 2022 2021 Change  
Change(1)
 
Nu Skin                                                
Americas 
$
124,445
  
$
138,512
  
(10
)%
 
(9
)%
 
$
248,025
  
$
272,273
  
(9
)%
 
(8
)%
Mainland China $154,182  $146,332   5%  (4)% $303,775  $284,028   7%  (2)% 
86,808
  
154,182
  
(44
)%
 
(42
)%
 
211,303
  
303,775
  
(30
)%
 
(31
)%
Americas/Pacific  151,730   127,919   19%  14%  301,195   202,492   49%  45%
Southeast Asia/Pacific 
94,067
  
83,968
  
12
%
 
16
%
 
184,303
  
167,257
  
10
%
 
14
%
South Korea  88,604   76,915   15%  6%  169,735   152,634   11%  3% 
69,308
  
88,604
  
(22
)%
 
(12
)%
 
141,441
  
169,735
  
(17
)%
 
(8
)%
Japan 
55,952
  
68,020
  
(18
)%
 
(3
)%
 
117,743
  
137,884
  
(15
)%
 
(3
)%
EMEA  83,115   50,776   64%  49%  159,295   86,179   85%  69% 
50,871
  
83,115
  
(39
)%
 
(31
)%
 
103,839
  
159,295
  
(35
)%
 
(28
)%
Southeast Asia  70,751   66,829   6%  2%  138,336   136,415   1%  (2)%
Japan  68,020   68,291   —   1%  137,884   129,591   6%  6%
Hong Kong/Taiwan  38,529   37,161   4%  —   74,874   72,988   3%  (1)%�� 
39,327
  
38,529
  
2
%
 
6
%
 
77,821
  
74,874
  
4
%
 
6
%
Nu Skin other  755   (85)  988%  988%  1,460   688   112%  112%  
1,318
   
947
  
39
%
 
39
%
  
1,938
   
1,825
  
6
%
 
6
%
Total Nu Skin  655,686   574,138   14%  8%  1,286,554   1,065,015   21%  15% 
522,096
  
655,877
  
(20
)%
 
(15
)%
 
1,086,413
  
1,286,918
  
(16
)%
 
(12
)%
Rhyz Investments                                                        
Manufacturing  48,140   37,918   27%  27%  94,125   65,065   45%  45% 
38,229
  
48,140
  
(21
)%
 
(21
)%
 
78,570
  
94,125
  
(17
)%
 
(17
)%
Grow Tech  191   310   (38)%  (38)%  364   314   16%  16%
Rhyz other  38   —           38   —           
290
   
38
  
663
%
 
663
%
  
531
   
38
  
1,297
%
 
1,297
%
Total Rhyz Investments  48,369   38,228   27%  27%  94,527   65,379   45%  45%  
38,519
   
48,178
  
(20
)%
 
(20
)%
  
79,101
   
94,163
  
(16
)%
 
(16
)%
Total $704,055  $612,366   15%  9% $1,381,081  $1,130,394   22%  16% 
$
560,615
  
$
704,055
  
(20
)%
 
(15
)%
 
$
1,165,514
  
$
1,381,081
  
(16
)%
 
(12
)%

(1)
Constant-currency revenue change is a non-GAAP financial measure. See “Non-GAAP Financial Measures,” below.

The following table sets forth segment contribution for the three- and six-month periods ended June 30, 20212022 and 20202021 for each of our reportable segments (U.S. dollars in thousands). Segment contribution excludes certain intercompany charges, specifically royalties, license fees, transfer pricing and other miscellaneous items. We use segment contribution to measure the portion of profitability that the segment managers have the ability to managecontrol for their respective segments. The prior year segment contribution has been recast for the fourth quarter of 2021 exit of the Grow Tech segment and the expense has been recast to Corporate and other. For additional information regarding our segments and the calculation of segment contribution, see Note 10 to the consolidated financial statements contained in this report.

 
Three Months Ended
June 30,
     
Six Months Ended
June 30,
    
 2021  2020  Change  2021  2020  Change  
Three Months Ended
June 30,
     
Six Months Ended
June 30,
    
                   2022 2021 Change 2022 2021 Change 
Nu Skin                                    
Americas 
$
30,026
  
$
28,998
  
4
%
 
$
55,149
  
$
57,743
  
(4
)%
Mainland China $51,480  $43,668   18% $90,919  $81,055   12% 
12,945
  
51,480
  
(75
)%
 
41,940
  
90,919
  
(54
)%
Americas/Pacific  32,106   25,791   24%  64,250   37,071   73%
Southeast Asia/Pacific 
24,367
  
21,213
  
15
%
 
47,773
  
40,861
  
17
%
South Korea  28,892   24,090   20%  55,417   48,189   15% 
20,578
  
28,892
  
(29
)%
 
43,321
  
55,417
  
(22
)%
Japan 
13,451
  
16,461
  
(18
)%
 
28,764
  
34,442
  
(16
)%
EMEA  13,681   3,342   309%  22,577   3,973   468% 
6,162
  
13,681
  
(55
)%
 
9,998
  
22,577
  
(56
)%
Southeast Asia  18,105   16,977   7%  34,354   33,695   2%
Japan  16,461   16,455   —   34,442   31,047   11%
Hong Kong/Taiwan  8,560   6,839   25%  15,908   13,777   15%  
9,161
   
8,560
  
7
%
  
17,851
   
15,908
  
12
%
Total Nu Skin  169,285   137,162   23%  317,867   248,807   28% 
116,690
  
169,285
  
(31
)%
 
244,796
  
317,867
  
(23
)%
Rhyz Investments                                          
Manufacturing  6,764   5,402   25%  12,590   8,251   53% 
1,188
  
6,764
  
(82
)%
 
4,480
  
12,590
  
(64
)%
Grow Tech  (6,980)  (5,487)  (27)%  (13,071)  (12,337)  (6)%
Rhyz other  (519)  —       (519)  —       
(1,299
)
  
(519
)
 
(150
)%
  
(2,345
)
  
(519
)
 
(352
)%
Total Rhyz Investments  (735)  (85)  (765)%  (1,000)  (4,086)  76% $
(111
)
 $
6,245
  
(102
)%
 $
2,135
  $
12,071
  
82
%

21
18
The following table providestables provide information concerning the number of Customers, Paid Affiliates and Sales Leaders as ofin our core Nu Skin business for the three-month periods ended June 30, 20212022 and 2020.  “Customers” are persons who have purchased products directly from2021. During the Company duringfirst quarter of 2022, in connection with the three months ended asintroduction of the date indicated. Our Customer numbers do not include consumers who purchase products directly from membersnew metric Paid Affiliates, we reviewed how we currently present Sales Leaders and adjusted that metric’s definition to what we believe provides a better insight into the trends of our sales force. “Sales Leaders” are independent distributors, and sales employees and independent marketers in Mainland China, who achieve certain qualification requirements.business. The definition of our Customer metric remained unchanged. We have recast the 2021 Sales Leaders to the new definition.

 
As of
June 30, 2021
  
As of
June 30, 2020
  % Increase (Decrease) 
  Customers  
Sales
Leaders
  Customers  
Sales
Leaders
  Customers  
Sales
Leaders
 
                   
Mainland China  328,526   18,647   321,946   17,104   2%  9%
Americas/Pacific  397,685   13,078   424,236   10,787   (6)%  21%
South Korea  153,287   7,935   159,926   6,881   (4)%  15%
EMEA  261,857   7,900   247,057   5,120   6%  54%
Southeast Asia  135,610   7,141   155,822   6,790   (13)%  5%
Japan  125,791   6,053   125,332   6,011   —   1%
Hong Kong/Taiwan  64,861   3,474   65,581   3,343   (1)%  4%
Total  1,467,617   64,228   1,499,900   56,036   (2)%  15%

●
“Customers” are persons who have purchased directly from the Company during the three months ended as of the date indicated. Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase products directly from members of our sales force.


●
“Paid Affiliates” are any Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who earned sales compensation during the three-month period. In all of our markets besides Mainland China, we refer to members of our independent sales force as “Brand Affiliates” because their primary role is to promote our brand and products through their personal social networks.


●
“Sales Leaders” are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who had achieved certain qualification requirements as of the end of each month of the quarter.

  
Three Months Ended
June 30,
    
Customers 2022  2021  Change 
Americas  
302,849
   
368,052
   
(18
)%
Mainland China 

392,268
   
328,526
   
19
%
Southeast Asia/Pacific  
152,775
   
165,221
   
(8
)%
South Korea  
135,290
   
153,282
   
(12
)%
Japan  
122,643
   
125,734
   
(2
)%
EMEA  
205,379
   
261,881
   
(22
)%
Hong Kong/Taiwan  
69,411
   
64,861
   
7
%
Total  
1,380,615
   
1,467,557
   
(6
)%

  
Three Months Ended
June 30,
    
Paid Affiliates 2022  2021  Change 
Americas  
44,523
   
53,492
   
(17
)%
Mainland China 

19,257
   
39,889
   
(52
)%
Southeast Asia/Pacific  
41,512
   
44,734
   
(7
)%
South Korea  
48,605
   
52,680
   
(8
)%
Japan  
38,269
   
38,623
   
(1
)%
EMEA  
32,323
   
42,682
   
(24
)%
Hong Kong/Taiwan  
17,644
   
17,815
   
(1
)%
Total  
242,133
   
289,915
   
(16
)%

  
Three Months Ended
June 30,
    
Sales Leaders 2022  2021  Change 
Americas  
9,320
   
11,752
   
(21
)%
Mainland China 

11,458
   
20,946
   
(45
)%
Southeast Asia/Pacific  
8,407
   
8,190
   
3
%
South Korea  
6,557
   
7,701
   
(15
)%
Japan  
6,097
   
6,057
   
1
%
EMEA  
5,192
   
8,002
   
(35
)%
Hong Kong/Taiwan  
3,054
   
3,446
   
(11
)%
Total  
50,085
   
66,094
   
(24
)%

19
Following is a narrative discussion of our results in each segment, which supplements the tables above.

Mainland ChinaAmericas. The increasedecline in revenue, Customers, Paid Affiliates and Sales Leaders in our Americas segment is predominantly attributable to the continued macro economic challenges in our Latin America markets. Our U.S. market's revenue increased 6% for the second quarter of 2022 and first six months of 2021, is attributable to the 9% benefit from favorable foreign-currency fluctuations for both periods presented.  Our Mainland China market continues to stabilize from effects of the restrictions on in-person meetings that began in 2019 based on government direction and continued through 2020 with the global pandemic. Our Sales Leaders increased 9%, benefiting from new Sales Leaders initiatives.

The year-over-year increase in segment contribution10% for the second quarter and first six months of 2021 is attributable to increased reported revenue and a 2.0 percentage point and a 2.1 percentage point improvement, respectively, in gross margin from a favorable product mix and decrease in freight expense to customers. The second quarter of 2021 also reflects a one-time benefit related to payroll taxes which resulted in lower general and administrative expenses.

Americas/Pacific. Our Americas/Pacific segment continued to benefit from greater adoption of innovative products shared increasingly via the social commerce business model supported by our digital tools, which drove increased revenue in the second quarter and first half of 2021. The new social and digital tools as well as strong sales leadership in social sharing in these markets have enabled our sales force to more effectively transact business digitally. These factors also led to an increase in Sales Leaders. Our reported revenue also reflects a 5% and 4% benefit2022 from favorable foreign-currency fluctuations forcontinued momentum, specifically from the launch of Beauty Focus Collagen+ during the second quarter and first half of 2021, respectively. Our Customers decreased 6%2021; the recent launch of Nu Biome, primarily attributableour latest wellness product aimed at aiding digestion to our Argentina market. Our Argentina market continues to experience economic instability from hyperinflation, which led to a 73%help maintain your overall gut health; and 56% decline in revenue for the second quarter and first half of 2021, respectively, along with a 77% decline in Customers and a 66% decline in Sales Leaders.continued social adoption.

The year-over-year increase in segment contribution for the second quarter and first half of 2021 primarily reflects2022 is partially attributable to the increase in revenue and a 2.3 percentage point and 1.4 percentage point improvement, respectively, in gross margin from product mix and less freight expense. The first half of 2021 also benefited from the fixed nature of general and administrativeour U.S. market, which has more favorable margins than our Latin American markets.  In addition, our selling expenses which as a percentage of revenue decreased 1.84.5 percentage points.points, primarily from a product mix shift to products with a lower commission percentage. In addition, with the decline in revenue and Sales Leaders, the expense associated with incentive trips decreased as well. The decline in segment contribution for the first half of 2022 is primarily attributable to the decline in revenue and higher sales promotions in the first quarter of 2022, partially offset by the increase in revenue in our U.S market.

South KoreaMainland China. Our South KoreaMainland China market continuescontinued to improve and benefited from successful product promotions and Sales Leader initiatives which contributed to a 15% increase in revenue for the second quarter and 15% increase in Sales Leaders. Our reported revenue reflects a 9% benefit and an 8% benefit from favorable foreign-currency fluctuations forbe challenged during the second quarter and first half of 2021, respectively.2022, with COVID-related lockdowns and other factors negatively impacting our selling and promotional activities. Due to increasing COVID-19 cases, the government implemented more significant lockdowns that precluded gatherings and meetings for the general population in Shanghai and other areas.  As previously disclosed, we anticipate that COVID-related challenges will persist throughout 2022. During the second quarter, our Customers increased 19% primarily from customer promotions and launch of digital tools.

During July 2022, we resumed allowing Sales Leader meetings in this market on a limited basis, so long as they are in compliance with government regulations and related controls that we have implemented. In our Quarterly Report on Form 10-Q for the 2022 first quarter, we referenced government inquiries related to a meeting in a hotel in Wuhan, Hubei Province organized by an independent marketer of Nu Skin China. The work on these inquiries was affected by the lockdowns in Mainland China, which delayed the inquiries from being closed during the second quarter; however, we continue to believe we are in the final stages of the process to close these matters. We believe the regulatory environment in Mainland China is becoming increasingly challenging and will continue to be so over the medium and long terms.

The year-over-year increase in segment contribution primarily reflects the increased revenue, along with improvements in gross margin, from a shift to more favorable margin products.

22
Table of Contents
EMEA. Our EMEA segment’s strong revenue trends continued into the second quarter and first half of 2021, benefiting from further adoption of the social sharing business model supported by our digital tools. During the second quarter we began the ageLOC Boost launch process, with a strong Sales Leader introduction, generating $11.1 million in sales. These factors contributed to a 64% and 85% increase in revenue for the second quarter and first half of 2021, respectively and a 54% increase in Sales Leaders. Our reported revenue also benefited 15% and 16% from foreign-currency fluctuations for the second quarter and first half of 2021, respectively. Similar to our Americas/Pacific segment, the strong sales leadership in social sharing has allowed the EMEA segment to more effectively transact business digitally.

The strong improvementdecrease in segment contribution for the second quarter and first half of 2021 is 2022 primarily attributable to higher revenue reflects lower revenue.  The decrease also reflects the following: (a) a 5.5 and the fixed nature of general and administrative expenses. In addition,3.9 percentage point decrease in gross margin improved for the second quarter and first half of 20212022, respectively, primarily from favorableincreased product promotions and discounts during the second quarter of 2022, along with a shift in product mix, fromwhere a higher proportion of devices were sold in the Boost launch.period and increased freight charges; (b) an increase in general and administrative expenses as a percentage of revenue, due to the fixed nature of these expenses; and (c) an increase in selling expense as a percentage of revenue. The salaries and service fees of our Sales Leaders in Mainland China are fixed until they are adjusted in a quarterly evaluation process. As a result, we have variations in our selling expenses as a percentage of revenue, particularly when there is a sequential change in revenue.

Southeast AsiaAsia/Pacific. The year-over-year increase inOur Southeast Asia/Pacific segment revenue increased 12% and 10% for the second quarter and first half of 2021 primarily reflects2022, respectively, including a benefit4% negative impact from favorable foreign currency fluctuations.  Sales Leader initiativesunfavorable foreign-currency fluctuations for both periods presented. The increase in revenue was partially driven by strong product launches of ageLOC Meta (locally referred to as ageLOC Reset in the Southeast Asia markets), which generated approximately $18.2 million in revenue for the second quarter and a virtual Sales Leader event$31.4 million in revenue for the first half of 2022, along with loosening of COVID restrictions in the markets. Our product launches and promotions during the quarter were focused on re-energizing our existing Sales Leaders, which led to a 5% increase in Sales Leaders. The decrease in Customers for the Southeast Asia segment was primarily attributable to the COVID-19 restrictions that still remain in place, as well as a decline in our Vietnam market, which is primarily from prior-year regulatory pressures that continue to impact our Customer numbers.Customers and Paid Affiliates.

The year-over-year increase in segment contribution for the second quarter and first half of 2021is primarily reflects the increase in revenue.

Japan. We remain encouraged by the increasingly younger demographic that is adept at social sharing. Our first quarter product launches, including ageLOC Boost and restages of other product lines, ledattributable to a 6% year-over-year increase inhigher revenue, for the first half of 2021, while the second quarter was flat.

The year-over-year increase in segment contribution for the first half of 2021 primarily reflects the increased revenue, a slight decline  in selling expense as a percent of revenue from normal fluctuations andalong with the fixed nature of general and administrative expenses on increased revenue.

South Korea. The second quarter and first half of 2022 decline in revenue was predominantly driven by a 10% and 9% negative impact from unfavorable foreign-currency fluctuations.  Our South Korea segment remained challenged from the ongoing COVID-related issues, leading to declines in revenue, Customers, Paid Affiliates and Sales Leaders.

The year-over-year decrease in segment contribution is primarily from a decline in revenue, along with a 2.0 and 1.5 percentage point increase in selling expenses as a percent of revenue for the second quarter and first half of 2022.

Japan. The decline in revenue is primarily attributable to a 15% and 12% unfavorable foreign-currency fluctuations for the second quarter and first half of 2022.

The year-over-year decline in segment contribution is primarily from the decline in revenue.

EMEA. The continued softening of momentum in our EMEA segment, further driven by the current geopolitical Russian/Ukraine conflict which has caused distraction to our sales force in the segment, led to a decline in revenue, Customers, Paid Affiliates and Sales Leaders. Our reported revenue was also negatively impacted from foreign-currency fluctuations. We have suspended business operations in Ukraine, and are closing our market in Russia. The Russia and Ukraine markets have historically accounted for less than 1% of our consolidated revenue. We look forward to our upcoming product introductions in the region but remain cautious in the near term given the macro environment.

The year-over-year decline in segment contribution reflects the decline in revenue along with a lower gross margin from unfavorable product mix and increased promotions, and the fixed nature of general and administrative expenses with a decline in revenue.

20
Hong Kong/Taiwan. Our Hong Kong /Taiwan segment revenue increased 4%2% for the second quarter and 3%4% for the first half of 2021, with2022. The increase in revenue is primarily from revenue growth in our Taiwan market from social selling. Our Customers also increased 7%, from the social selling growth in our Taiwan market. Our Hong Kong market continues to be challenged from the ongoing pressures from COVID-19, which led to a 4% benefit from favorable foreign-currency fluctuations for both periods presented.  The fourth quarter of 2020 product launches drove an increasedecline in Sales Leaders which increased 4% as of the second quarter of 2021, compared to the prior-year period.and Paid Affiliates.

The increase in segment contribution wasfor both periods presented, is primarily driven by reportedfrom the increase in revenue growth,along with decreases in general and administrative expenses, remaining flat on slightly improved revenue.from effective cost saving measures.

Manufacturing. Our Manufacturing segment continues to generate strong results with a 27% year-over-year increase in revenue declined 21% for the second quarter and a 45% increase17% for the six-month period ended June 30, 2021. Our continued investmentsfirst half of 2022, primarily due to our customers rebalancing their inventory from higher levels in additional capacity have allowed our manufacturing companies to increase revenue as the2021, reducing demand for nutrition and personal care products continues to expand.the first half of 2022.

The 25% increase and 53% increasedecline in segment contribution foris attributable to the three- and six-month periods ended June 30, 2021, respectively, reflectlower revenue increases.on fixed costs, along with the revenue mix between our manufacturing entities with different profitability.

Grow Tech. Our Grow Tech segment continues to invest in controlled-environment agriculture technologies. We have found this technology has broader applications in agriculture, and we are investing to pursue this potential opportunity. We are expecting continued losses in 2021 from this segment as we continue to research and refine the technology. We are currently evaluating strategic alternatives with respect to this business.

23
Table of Contents
Consolidated Results

Revenue

Revenue for the three-month period ended June 30, 2021 increased 15%2022 decreased 20% to $704.1$560.6 million, compared to $612.4$704.1 million in the prior-year period. Revenue for the six-month period ended June 30, 2021 increased 22%2022 decreased 16% to $1.4$1.2 billion compared to $1.1$1.4 billion. Our reported revenue also benefited 6%was negatively impacted 5% and 4% from foreign-currency fluctuations for boththe three- and six-month periods presented of 2021.ended June 30, 2022, respectively. For a discussion and analysis of these increasesdecreases in revenue, see “Overview” and “Segment Results,” above.

Gross profit

Gross profit as a percentage of revenue was 75.6%73.6% for the second quarter of 2021,2022, compared to 74.8%75.6% for the prior-year period, and 75.2%73.4% for the first six months of 2021,2022, compared to 75.2% for the prior-year period.  Gross profit as a percentage of revenue for core Nu Skin increased 0.7decreased 1.3 percentage points to 78.3%77.0% for the second quarter of 20212022 and increased 0.3decreased 1.4 percentage points to 78.1%76.7% for the first halfsix months of 2021.  Our2022.  The decline in our Nu Skin gross profit benefitted from a favorable product mix, along with lower freight as a percentagemargin is predominantly attributable to an increase in sales promotions, specifically of revenue.our ageLOC LumiSpa devices in preparation of the launch of the ageLOC LumiSpa iO, which begins in the third quarter of 2022.

Selling expenses

Selling expenses as a percentage of revenue were 39.5%decreased to 39.1% for the second quarter of 2021,2022, compared to 40.6%39.9% for the prior-yearprior year period, and 39.9%decreased to 39.6% for the first six months of 2021,2022, compared to 40.2%40.3% for the prior-year period. Core Nu Skin selling expenses as a percentage of revenue decreased 0.90.8 percentage points to 42.4%42.0% for the second quarter of 20212022 and increased 0.2decreased 0.8 percentage points to 42.9%42.5% for the first halfsix months of 2021.2022. Selling expenses for our core Nu Skin business are driven by the specific performance of our individual Sales Leaders. Given the size of our sales force and the various components of our compensation and incentive programs, selling expenses as a percentage of revenue typically fluctuate plus or minus approximately 100 basis points from period to period.

General and administrative expenses

General and administrative expenses increaseddecreased to $168.8$141.6 million in the second quarter of 2021,2022, compared to $151.6$166.1 million in the prior-year period and increaseddecreased to $338.6$290.1 million in the first halfsix months of 2021,2022, compared to $301.2$333.7 million in the prior-year period. The $37.4$24.5 million increasedecrease for the second quarter of 2022 was primarily from a $15.8 million contraction in labor expenses from lower employee performance incentive compensation, along with our fourth quarter of 2021 exit of the Grow Tech segment, which led to $7.0 million less expense for the second quarter of 2022. The $43.6 million decrease for the first six months of 2022, was primarily from a $27.4 million contraction in labor expenses from lower employee performance incentive compensation, along with our fourth quarter of 2021 exit of the Grow Tech segment, which led to $13.1 million less expense for the first half of 2021 was mainly driven by a $18.7 million increase in labor expenses, attributable to higher employee performance incentive compensation, and approximately $7.4 million in increased IT expenses, associated with our cloud transition and ongoing development of digital tools. The increase for the second quarter is mainly driven by $4.4 million in increased IT expenses, along with a $4.6 million increase in labor expense.2022. General and administrative expenses as a percentage of revenue decreasedincreased to 24.0%25.3% for the second quarter of 2021,2022, from 24.7%23.6% for the prior-year period, and decreased to 24.5%24.9% for the first halfsix months of 2021,2022, from 26.6%24.2% for the prior-year period.

21
Other income (expense), net

Other income (expense), net was $(4.0)$(8.6) million for the second quarter of 20212022 compared to $1.6$(4.0) million for the prior-year period, and $(2.4)$(10.1) million for the first halfsix months of 20212022 compared to $(4.6)$(2.4) million for the prior-year period. The increasedecrease in expenseother income for the second quarter primarily relatesis predominately from a $5.7 million unrealized investment loss related to $3.3 million from foreign-currency fluctuations along with a loss on asset disposal. The decreasecontrolled environment agriculture company we invested in expense for the first halfas part of our previous Grow Tech segment. Following our fourth quarter of 2021 primarily relatesexit from the Grow Tech segment, we are in the process of exiting our investment. In addition, we recorded a $3.0 million increase in foreign currency losses during the second quarter of 2022 compared to the prior-year period, partially offset by a decrease$1.6 million decline in interest expense from lower interest rates.the contingent consideration associated with our previous acquisition, due to current period changes in our assumptions and forecast.

Provision for income taxes

Provision for income taxes for the three- and six-month periods of 2021ended June 30, 2022 was $8.7 million and $20.6 million, respectively, compared to $22.0 million and $39.1 million, compared to $17.8 million and $28.5 million for the prior-year periods. The effective tax rates for the three- and six-month periods ended June 30, 2022 were 27.1%20.2% and 26.8%22.0% of pre-tax income compared, respectively, to 29.8%27.1% and 31.6%26.8% in the prior-year periods. The decrease in the effective tax rate for the second quarter and first six monthshalf of 20212022 primarily reflects the strong growth in the U.S. market, and Manufacturing segment, which enabled us to utilize additional foreign tax credits to offset the U.S. income taxes.

Net income

As a result of the foregoing factors, net income for the second quarter of 20212022 was $59.3$34.2 million, compared to $41.9$59.3 million in the prior-year period. Net income for the first six months of 20212022 was $106.8$73.0 million, compared to $61.6$106.8 million for the first six months of 2020.2021.

24
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Liquidity and Capital Resources

Historically, our principal uses of cash have included operating expenses (particularly selling expenses) and working capital (principally inventory purchases), as well as capital expenditures, stock repurchases, dividends, and debt repayment and the development of operations in new markets.repayment. We have at times incurred long-term debt, or drawn on our revolving line of credit, to fund strategic transactions, stock repurchases, capital investments and short-term operating needs. We typically generate positive cash flow from operations due to favorable margins and have generally relied on cash from operations to fund operating activities. In the first six months of 2021,2022, we generated $1.9$54.1 million in cash from operations, compared to $166.1$1.9 million in cash from operations during the prior-year period. The decreaseincrease in cash flow from operations primarily reflects aan approximate $32.2 million decline in inventory during the period, compared to an inventory increase of $80.2 million increase in inventorythe prior year period, partially attributable to a strategic decision to shift back to ocean freight from air freight, resulting in more inventory in our supply chain, along with increases at our manufacturing entities to support the revenue growth. Our cash from operations was also impactedoffset by the lower revenue and a decrease in accrued expenses from the first half of 2022 payout of our fourth quarter of 2021 payout of the accrued commission and accrued employee incentive payments attributable to our fourth-quarter growth. We generated $20.7 million in cash from operations in the second quarter of 2021.restructuring cost. Cash and cash equivalents, including current investments, as of June 30, 20212022 and December 31, 20202021 were $379.3$381.8 million and $423.9$354.8 million, respectively, with the decreaseincrease being driven by purchasescash from operations, increased debt following our debt modification during the second quarter of property2022, and equipment,cash received from the exercise of employee stock options, partially offset by capital expenditures, as discussed below, our quarterly dividend payments, stock repurchases and acquisitions, partially offset by increased borrowings underpayment on liabilities associated with our revolving credit facility.fourth quarter 2021 restructuring.

Working capital. As of June 30, 2021,2022, working capital was $345.2$498.8 million, compared to $360.3$343.3 million as of December 31, 2020.2021. The declineincrease in working capital is primarily attributable to our second quarter debt modification, which resulted in a net $120.0$52.5 million increaseof incremental borrowings, while our short-term debt decreased $67.5 million. Our working capital also benefited from a $83.1 million reduction in borrowings under our revolving credit facility duringaccrued expenses, primarily from the first half of the year to fund our acquisitions2022 pay-out of restructuring cost and stock repurchases and other expenses for operations,employee incentive accruals, partially offset by increaseda $45.7 million decrease in inventory.

Capital expenditures. Capital expenditures for the six months ended June 30, 20212022 were $36.8$19.8 million. We expect that our capital expenditures in 20212022 will be primarily related to:

●the expansion and upgrade of facilities in our various markets;

●purchases and expenditures for computer systems and equipment, software, and application development;

●the expansion and upgrade of facilities in our various markets; and

●a new manufacturing plant in Mainland ChinaChina.

We estimate that capital expenditures for the uses listed above will total approximately $80–95$70–90 million for 2021.2022. We are currently in the building phaseexpecting to complete construction of the new manufacturing plant in Mainland China.  To dateChina in the back half of 2022.  As of June 30, 2022, we have spent approximately $28$40.5 million on this project, with $3.2 million in the first half of 2022 and expect that our expenditures for this project will total approximately $55$52-57 million, over the next 1-2 years, including approximately $25-30$15-20 million during 2021.2022.

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Credit Agreement. In April 2018,On June 14, 2022, we entered into aan Amended and Restated Credit Agreement (the “Credit Agreement”) with various financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a $400.0 million term loan facility and a $350.0$500.0 million revolving credit facility, each with a term of five years. We used the proceeds of the term loan and the draw on the revolving facility to pay off the previous credit agreement, and the outstanding balance on the convertible notes.agreement. The interest rate applicable to the facilities is subject to adjustments based on our consolidated leverage ratio. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the first and secondsubsequent years 7.5% during the third and fourth years and 10.0% during the fifth year after the closing date of the Credit Agreement, with the remainder payable at final maturity. As of June 30, 2021 and December 31, 2020,2022, we had $120.0$30.0 million and noof outstanding borrowings under our revolving credit facility, and $322.5$400.0 million and $337.5 million remaining balance on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $(1.7) million and $(2.1)$(2.8) million as of June 30, 2021 and December 31, 2020, respectively,2022, related to the Credit Agreement. The Credit Agreement requires us to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. We are currentlyAs of June 30, 2022, we were in compliance with all debt covenants under the Credit Agreement. We are planning to refinance our Credit Agreement within the next twelve months.

Modification of previous credit agreement. On June 14, 2022, we repaid our outstanding debt under our credit agreement, dated as of April 18, 2018, with several financial institutions as lenders and Bank of America, N.A., as administrative agent. We had indebtedness of $70.0 million on our revolver as of December 31, 2021, and $307.5 million on our term loan as of December 31, 2021.

Derivative Instruments. As of June 30, 2021,2022, we had four interest rate swaps, with a total notional principal amount of $200 million and a maturity date of July 31, 2025. We entered into these interest rate swap arrangements during the third quarter of 2020 to hedge the variable cash flows associated with our variable-rate debt under the Credit Agreement.

Stock repurchase plan. In 2018, our board of directors approved a stock repurchase plan authorizing us to repurchase up to $500.0 million of our outstanding shares of Class A common stock on the open market or in private transactions.  During the first halfsecond quarter of  2021,2022, we repurchased approximately 1.20.2 million shares of our Class A common stock under the plan for $60.4$10.0 million. As of June 30, 2021, $265.42022, $225.4 million was available for repurchases under the plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

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Dividends. In February and May 2021,2022, our board of directors declared quarterly cash dividends of $0.38$0.385 per share. These quarterly cash dividends of $19.3 million and $19.0$19.4 million were paid on March 10, 20219, 2022 and June 9, 20218, 2022 to stockholders of record on February 26, 202128, 2022 and May 28, 2021.27, 2022. In August 2021,2022, our board of directors declared a quarterly cash dividend of $0.38$0.385 per share to be paid on September 8, 20217, 2022 to stockholders of record on August 27, 2021.26, 2022. Currently, we anticipate that our board of directors will continue to declare quarterly cash dividends and that the cash flows from operations will be sufficient to fund our future dividend payments. However, the continued declaration of dividends is subject to the discretion of our board of directors and will depend upon various factors, including our net earnings, financial condition, cash requirements, future prospects and other relevant factors.

Cash from foreign subsidiaries. As of June 30, 20212022 and December 31, 2020,2021, we held $379.3$381.8 million and $423.9$354.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include $321.2$257.2 million and $374.7$274.9 million as of June 30, 20212022 and December 31, 2020,2021, respectively, held in our operations outside of the U.S. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into U.S. dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.

We typically fund the cash requirements of our operations in the U.S. through intercompany dividends, intercompany loans and intercompany charges for products, use of intangible property, and corporate services. However, some markets impose government-approval or other requirements for the repatriation of dividends. For example, in Mainland China, we are unable to repatriate cash from current operations in the form of dividends until we file the necessary statutory financial statements for the relevant period. As of June 30, 2021,2022, we had $67.9$56.6 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of March 31, 2021June 30, 2022 and December 31, 2020,2021, we had $10.6$12.6 million and $10.6$11.3 million, respectively, in intercompany receivablereceivables with our Argentina subsidiary. We also have intercompany loan arrangements within some of our markets, including Mainland China, that allow us to access available cash, subject to certain limits in Mainland China and other jurisdictions. We also have drawn on our revolving line of credit to address cash needs until we can repatriate cash from Mainland China or other markets, and we may continue to do so. Except for $60.0 million of earnings in Mainland China that we designated as indefinitely reinvested during the second quarter of 2018, we currently plan to repatriate undistributed earnings from our non-U.S. operations as necessary, considering the cash needs of our non-U.S. operations and the cash needs of our U.S. operations for dividends, stock repurchases, capital investments, debt repayment and strategic transactions. Repatriation of non-U.S. earnings is subject to withholding taxes in certain foreign jurisdictions. Accordingly, we have accrued the necessary withholding taxes related to the non-U.S. earnings.

We currently believe that existing cash balances, future cash flows from operations and existing lines of credit will be adequate to fund our cash needs on both a short- and long-term basis. The majority of our historical expenses have been variable in nature, and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances, future cash flow from operations and current lines of credit are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds in the debt or equity markets or restructuring our current debt obligations. Additionally, we would consider realigning our strategic plans, including a reduction in capital spending, stock repurchases or dividend payments.

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Contingent Liabilities

Please refer to Note 11 to the consolidated financial statements contained in this Quarterly Report for information regarding our contingent liabilities.

Critical Accounting Policies and Estimates

There were no significant changes in our critical accounting policies or estimates during the second quarter of 2021.2022.

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Seasonality and Cyclicality

In addition to general economic factors, we are impacted by seasonal factors and trends such as major cultural events and vacation patterns.  For example, most Asian markets celebrate their respective local New Year in the first quarter, which generally has a negative impact on that quarter.  We believe that direct selling is also generally negatively impacted during the third quarter, when many individuals, including our sales force, traditionally take vacations.

Prior to making a key product generally available for purchase, we may do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders, a limited-time offer, or other product introduction or promotion. These offerings may generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue, Sales Leaders and/or Customers during the quarter and can skew year-over-year and sequential comparisons.

Non-GAAP Financial Measures

Constant-currency revenue change is a non-GAAP financial measure that removes the impact of fluctuations in foreign-currency exchange rates, thereby facilitating period-to-period comparisons of the Company’s performance. It is calculated by translating the current period’s revenue at the same average exchange rates in effect during the applicable prior-year period and then comparing that amount to the prior-year period’s revenue. We believe that constant-currency revenue change is useful to investors, lenders and analysts because such information enables them to gauge the impact of foreign-currency fluctuations on our revenue from period to period.

Available Information

Our website address is www.nuskin.com. We make available, free of charge on our Investor Relations website, ir.nuskin.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

We also use our Investor Relations website, ir.nuskin.com, as a channel of distribution of additional Company information that may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currency Risk and Exchange Rate Information

A majority of our revenue and many of our expenses are recognized outside of the United States, except for inventory purchases, a significant portion of which are primarily transacted in U.S. dollars from vendors in the United States. The local currency of each of our Subsidiaries’ primary markets is considered the functional currency with the exception of our Asia product-distribution subsidiary in Singapore and, as discussed below, our subsidiary in Argentina. All revenue and expenses are translated at weighted-average exchange rates for the periods reported. Therefore, our reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar and will be negatively impacted by a strengthening of the U.S. dollar. These impacts may be significant because a large portion of our business is derived from outside of the United States. Given the uncertainty of exchange rate fluctuations, it is difficult to predict the effect of these fluctuations on our future business, product pricing and results of operations or financial condition.

In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiary in Argentina. Under highly inflationary accounting, the functional currency for our subsidiary in Argentina became the U.S. dollar, and the income statement and balance sheet for this subsidiary have been measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other income (expense), net and was not material. As of June 30, 2021,2022, our subsidiary in Argentina had a small net peso monetary position. Net sales of our subsidiary in Argentina were less than 2% of our consolidated net sales for the three- and six-month periods ended June 30, 20212022 and 2020.2021.

We may seek to reduce our exposure to fluctuations in foreign currency exchange rates through the use of foreign currency exchange contracts and through intercompany loans of foreign currency. We do not use derivative financial instruments for trading or speculative purposes. We regularly monitor our foreign currency risks and periodically take measures to reduce the impact of foreign exchange fluctuations on our operating results. As of June 30, 20212022 and 2020,2021, we did not hold material non-designated mark-to-market forward derivative contracts to hedge foreign denominated intercompany positions or third party foreign debt. As of June 30, 2021,2022, and 20202021 we did not hold any material forward contracts designated as foreign currency cash flow hedges. We continue to evaluate our foreign currency hedging policy.

For additional information about our market risk see Note 9 to the consolidated financial statements contained in this Quarterly Report.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  Based on that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of June 30, 2021.2022.

Changes in Internal Controls Over Financial Reporting.

We made no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 20212022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

There have been no material developments concerning the matters discussed in the “Legal Proceedings” section of our Annual Report on Form 10-K for the 20202021 fiscal year. Please refer to Note 11 to the consolidated financial statements contained in this report for certain information regarding our legal proceedings.

ITEM 1A.
RISK FACTORS

The information presented below supplements and should be read in conjunction with the detailed discussion of risks associated with our business in our recent SEC filings, including our Annual Report on Form 10-K for the 20202021 fiscal year and subsequent reports.

LawsIf we are unable to retain our existing sales force and regulationsrecruit additional people to join our sales force, our revenue may prohibit or severely restrictnot increase and may even decline.

Our products are primarily marketed by our sales force, and we depend on them to generate virtually all of our revenue. Our sales force may terminate their services at any time, and like most direct selling companies, we experience high turnover among our sales force from year to year. People who join our company to purchase our products for personal consumption or for short-term income goals frequently only stay with us for a short time. Sales Leaders who have committed time and causeeffort to build a sales organization will generally stay for longer periods. To increase our revenue, we must increase the number of and/or the productivity of our sales force. We must also expand our outreach and profitabilityoutbound efforts to decline,attract, connect and regulators could adoptnurture new regulations that harm our business.customers for a wider consumer base who purchase product and whom we can foster along a consumer journey to promote retention and higher lifetime value.

Various government agencies throughout
We have experienced periodic fluctuations in both Sales Leaders and Customers in the world regulate direct sales practices. Lawspast and regulationscould experience such fluctuations again in Japan, South Korea andthe future. For example, our Sales Leaders in Mainland China are particularly stringentdeclined 46% from December 31, 2018 to December 31, 2019 due to such factors as meeting restrictions and subjectnegative media scrutiny. Our ability to broad discretionretain our Sales Leaders and Customers could be affected as our sales force makes increased use of social sharing channels, which may allow them to more easily engage their consumers and sales network in enforcement by regulators. These lawsother opportunities. If our initiatives do not drive growth in both Sales Leaders and regulations are generally intendedCustomers, our operating results could be harmed. While we take many steps to prevent fraudulent or deceptive schemes, often referredhelp train, motivate and retain our sales force, we cannot accurately predict how the number and productivity of our sales force may fluctuate because we rely primarily upon our Sales Leaders to as “pyramid schemes,” that compensate participants primarily for recruiting additional participants without significant emphasis on product salesfind new consumers and to consumers. The lawsfind, train and regulationsdevelop new Sales Leaders. Our operating results could be harmed if we and our Sales Leaders do not generate sufficient interest in our current markets often:business and its products to retain and motivate our existing sales force and attract new people to join our sales force.

The number and productivity of our sales force is negatively impacted by several additional factors, including:


●impose requirements relatedany adverse publicity or negative public perception regarding us, our products or ingredients, our distribution channel, or our industry or competitors;

●lack of interest in, dissatisfaction with, or the technical failure of, existing or new products;

●lack of compelling products or income opportunities, including through our sales compensation plans and incentive trips and other offerings;

●negative sales force reaction to sign-up, order cancellations,changes in our sales compensation plans or to our failure to make changes that would be necessary to keep our compensation competitive with the market;

●interactions with our company, including our actions to enforce our policies and procedures and the quality of our customer service;

●any regulatory actions or charges against us or others in our industry, as well as regulatory changes that impact product returns, inventory buy-backsformulations and cooling-off periods forsales viability;

●general economic, business, public health and geopolitical conditions, including employment levels, employment trends such as the gig and sharing economies, pandemics or other conditions that curtail person-to-person interactions, and the ongoing conflict in Russia and Ukraine which has caused distraction to our sales force;

●changes in the policies of social media platforms used to prospect or recruit potential consumers and sales force participants;

●our and our sales force’s ability to provide a positive customer experience and to facilitate customer loyalty;

●recruiting efforts of our competitors and changes in consumer-loyalty trends; and

●potential saturation or maturity levels in a given market, which could negatively impact our ability to attract and retain our sales force in such market.

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Our ability to conduct business in international markets may be affected by political, legal, tax and regulatory risks.

Our ability to capitalize on growth in new international markets and to maintain the current level of operations in our existing international markets is exposed to risks associated with our international operations, including:


●the possibility that a government might ban or severely restrict our sales compensation and consumers;business models;

●requirethe possibility that local civil unrest, political instability, or changes in diplomatic or trade relationships might disrupt our operations in one or more markets—for example, the ongoing conflict in Russia and Ukraine has caused distraction to our sales force;

●the lack of well-established or reliable legal systems in certain areas where we operate;

●the presence of high inflation in the economies of international markets in which we operate;

●the possibility that a government authority might impose legal, tax, customs, or other financial burdens on us or our sales force, due, for example, to register with government agencies;the structure of our operations in various markets;

●the possibility that a government authority might challenge the status of our sales force as independent contractors or impose limitsemployment or social taxes on the amount ofour sales compensation we can pay;
●impose reporting requirements;force; and

●requirethe possibility that governments may impose currency remittance restrictions limiting our sales force is compensated primarily for selling products and not for recruiting others.ability to repatriate cash.


Complying with these widely varying and sometimes inconsistent rules and regulations can be difficult, time-consuming and expensive, and may requireThere has been an increasing level of tension in U.S.-China relations over the last few years. Given the significant resources. The laws and regulations governing direct selling are modified from time to time, and like other direct selling companies, we are subject from time to time to government inquiries and investigations insize of our various markets related to our direct selling activities. This can require us to make changes toChina business, our business model and aspects of our sales compensation plan in the markets impacted by such changes and investigations. In June 2021, the U.S. Federal Trade Commission (“FTC”) announced that it is initiating a review of its Business Opportunity Rule, which imposes certain obligations on business opportunity sellers in their dealings with prospective buyers. Currently, multi-level marketing companies are exempted from this rule. If this exemption is eliminated or if new regulations are adopted for multi-level marketing companies, it could negatively impact the growth of our sales force and our revenue. In addition, markets where we currently do business could change their laws or regulations to prohibit direct selling. If we are unable to obtain necessary licenses and certifications within required deadlines or continue business in existing markets or commence operations in new markets because of these laws, our revenue and profitability may decline. Any delay could negatively impact our revenue.


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Epidemics, including the recent outbreak of COVID-19, and other crises have and may continue to negatively impact our business.

Due to the person-to-person nature of direct selling, our results of operations have been, and will likely continue to be harmed if the fearrelations continue to deteriorate or additional sanctions or restrictions are imposed by either government. In addition, there have been adverse public reaction and media attention to statements made by representatives of a communicable and rapidly spreading disease or other crises such as natural disasters result in travel restrictions or cause people to avoid group meetings or gatherings or interaction with other people. It is difficult to predict the impact on our business, if any, of the emergence of new epidemics or other crises. The outbreak of COVID-19 and resulting pandemic resulted in significant contraction of economies around the world and interrupted global supply chains as many governments issued stay-at-home orders to combat COVID-19. Government-imposed restrictions and public hesitance regarding in-person gatherings, travel and visiting public places have reduced our sales force’s ability to hold sales meetings, resulted in cancellations of key sales leader events and incentive trips, and required us to temporarily close our walk-in and fulfillment locations in some markets where we have such properties. The outbreak has also impacted our ability to obtain some ingredients and packaging as well as ship products in some markets. Our supply chain and logistics have incurred some interruptions and cost impacts to date, and we could experience more significant interruptions and cost impacts or face more significant closures in the future. These factors and other eventsbusinesses related to COVID-19these issues that have negatively impacted our salesadversely affected business. We could similarly face adverse public or media attention, and operations and will likely continue to negatively affect our business and our financial results. Although some of the negative impacts of COVID-19 have recently improved, this situation continues to be fluid and there is uncertainty regarding its duration and future impacts. For example, the delta variant or other variants have caused some of the pandemic’s negative impacts to worsen or return. In addition, the productivity of our sales force could be negatively impacted as restrictions are lifted and our sales force is able to more freely travel and take vacations.

Any significant decline in our operating results in the future could also adversely affect our financial position and liquidity. Under the terms of our existing credit facility, we are required to maintain certain interest coverage and leverage ratios. In addition, our outstanding borrowings under our credit facility and related term loan impose debt service and amortization requirements. A significant deterioration in our results of operations in the futurepotentially increased regulatory scrutiny, as a result of the COVID-19 pandemic could impact our ability to comply with our financial covenants and debt service and amortization obligations, which could result in an event of default under the terms of our credit facility. An event of default under our credit facility could result in an inability to access funding under the agreement and the acceleration of our obligations, which would have a material adverse effect on our financial condition and liquidity.

In addition, regulatory authorities closely scrutinize the product- and earnings-related claims madeincreased trade or political tensions or any statements or actions by direct-selling companies and their sales force, including claims related to the COVID-19 pandemic. For example, during 2020, the FTC issued letters that warned several direct-selling companies to remove and address claims that theyemployees or members of their sales force were making about their products’ ability to treat or prevent COVID-19 and/or about the earnings that people who have recently lost income could make. Although we take steps to educate our Brand Affiliates on proper claims, if our Brand Affiliates make improper claims, or if regulators determine we are making any improper claims, this could lead to an FTC investigation and could harm our business and reputation.

Difficult economic conditions could harm our business.

Difficult economic conditions, such as high unemployment levels, inflation, or recession, could adversely affect our business by causing a decline in demand for our products, particularly if the economic conditions are prolonged or worsen. For example, an increase in oil prices would likely cause our shipping expenses to increase, which would negatively affect our profitability. In addition, economic conditions may adversely impact access to capital for us and our suppliers, may decrease the ability of our sales force and consumersthat generate publicity with respect to obtain or maintain credit cards, and may otherwise adversely impact our operations and overall financial condition. There also appears to be increased concerns about potential inflationary pressures, which could have a negative impact on our business if it impacts the discretionary spending of our consumers.these issues.

Our business could be negatively impacted by corporate citizenship and sustainability matters.

There are increased expectations and focus from certain investors, Brand Affiliates, consumers, employees and other stakeholders concerning corporate citizenship and sustainability matters, including environmental, social and governance matters; packaging; responsible sourcing; and diversity, equity and inclusion matters. From time to time, we announce certain initiatives and goals in these areas. We could fail, or be perceived to fail, in our achievement of such initiatives or goals or in stakeholders’ expectations, or we could fail in accurately reporting our progress on such initiatives, goals and expectations. Moreover, the standards by which corporate citizenship and sustainability efforts and related matters are measured are developing and evolving, and certain areas are subject to assumptions. The standards or assumptions could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business.

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ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

 (a)  (b)  (c)  (d) 
Period 
Total
Number
of Shares
Purchased
  
Average
Price Paid
per Share
  
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
  
Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs
(in millions)(1)
 
             
April 1 - 30, 2021  115,209  $52.44   115,209  $269.4 
May 1 - 31, 2021  66,299   56.83   66,299  $265.6 
June 1 - 30, 2021  3,215   60.45   3,215  $265.4 
Total  184,723  $54.16   184,723     
  (a)  (b)  (c)  (d) 
Period 
Total
Number
of Shares
Purchased
  
Average
Price Paid
per Share
  
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
  
Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs
(in millions)(1)
 
             
April 1 - 30, 2022  
—
  
$
—
   
—
  
$
235.4
 
May 1 - 31, 2022  
109,818
   
44.64
   
109,818
  
$
230.5
 
June 1 - 30, 2022  
112,017
   
45.55
   
112,017
  
$
225.4
 
Total  
221,835
  
$
45.10
   
221,835
     

(1)
In August 2018, we announced that our board of directors approved a stock repurchase plan. Under this plan, our board of directors authorized the repurchase of up to $500 million of our outstanding Class A common stock on the open market or in privately negotiated transactions.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.
OTHER INFORMATION

On August 3, 2021, the Compensation and Human Capital Committee (the “Committee”) of1, 2022, we adopted a strategic plan to focus resources on the Company’s Boardstrategic priorities and optimize future growth and profitability. This global program includes workforce reductions and footprint optimization. We estimate total charges under the program will be approximately $35–$45 million, consisting of Directors adjusted$20–$25 million in cash severance payments, approximately $10 million in cash costs associated with lease terminations and $5–$10 million of non-cash charges of impairment of fixed assets related to the compensation of Mark H. Lawrence,footprint optimization. We expect that the Company’s Chief Financial Officer, due to additional responsibilities he recently assumed. Mr. Lawrence’s salary was increased to $575,000, effective September 1, 2021, andactions contemplated under the Committee currently anticipates increasing the grant value of Mr. Lawrence’s annual equity incentive award to approximately $1,300,000 inprogram will be substantially completed by December 31, 2022.

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ITEM 6.
EXHIBITS

Exhibits
Regulation S-K
Number
 Description
   
Amended and Restated Credit Agreement among the Company, various financial institutions, and Bank of America, N.A. as administrative agent, dated as of June 14, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 17, 2022).
 Certification by Ritch N. Wood,Ryan S. Napierski, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Certification by Mark H. Lawrence, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Certification by Ritch N. Wood,Ryan S. Napierski, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Certification by Mark H. Lawrence, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
 Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
 
Inline XBRL Taxonomy Extension Schema Document
101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
 
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

August 4, 2021

NU SKIN ENTERPRISES, INC.
August 4, 2022
  
By:/s/ Mark H. LawrenceNU SKIN ENTERPRISES, INC. 
 
By:
/s/ Mark H. Lawrence
 
 Chief Financial Officer
Mark H. Lawrence
 
 
Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
 

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